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Compact case
Authors: Thad I Enyinna
Published by: Lagos Business School
Originally published in: 2011
Version: March 10, 2016

Abstract

The decision before the managers at Bridgestone Bank Plc is whether to install a new brand of inverter systems ('Trex A') to provide electrical power back-up to all automatic teller machines (ATMs) planned to be installed at all 300 of the bank’s branches, or to continue using an existing brand ('Trex B'). The bank had favoured the use of Trex B systems, mainly because of budget constraints. Management must decide whether the financial advantage derived from installing the less expensive Trex B is sufficient to offset the additional cost of the more efficient Trex A. This case introduces students to decision analysis techniques and the use of decision trees. Students are introduced to the following: constructing, analysing and using decision trees in making investment decisions; identifying decision alternatives and possible consequences; calculating payoffs of the various combinations of decision alternatives and possible outcomes; how costs previously incurred affect future decisions and what cost aspects could be categorised as sunk costs; assessing probabilities; constructing risk profiles and using them to estimate the relative risks inherent in each possible outcome; testing assumptions through sensitivity analysis.
Location:
Industry:
Size:
24 firms
Other setting(s):
Present

About

Abstract

The decision before the managers at Bridgestone Bank Plc is whether to install a new brand of inverter systems ('Trex A') to provide electrical power back-up to all automatic teller machines (ATMs) planned to be installed at all 300 of the bank’s branches, or to continue using an existing brand ('Trex B'). The bank had favoured the use of Trex B systems, mainly because of budget constraints. Management must decide whether the financial advantage derived from installing the less expensive Trex B is sufficient to offset the additional cost of the more efficient Trex A. This case introduces students to decision analysis techniques and the use of decision trees. Students are introduced to the following: constructing, analysing and using decision trees in making investment decisions; identifying decision alternatives and possible consequences; calculating payoffs of the various combinations of decision alternatives and possible outcomes; how costs previously incurred affect future decisions and what cost aspects could be categorised as sunk costs; assessing probabilities; constructing risk profiles and using them to estimate the relative risks inherent in each possible outcome; testing assumptions through sensitivity analysis.

Settings

Location:
Industry:
Size:
24 firms
Other setting(s):
Present

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