Risk Decision Analysis: MBC Farms' Horse Hay Enterprise

James Pritchett

Review of Agricultural Economics, 2004, vol. 26, issue 4, 579-588

Abstract: This case examines the feasibility of a new business venture with uncertain net revenues. MBC Farms seeks to sell horse hay to stable owners. Craig, the manager of MBC Farms' cropping enterprises, must evaluate the enterprise's profit potential in the face of uncertain hay quality and variable horse hay prices, and report his findings to MBC Farms' management team. Craig also evaluates whether a contract of 0, 500, or 1,000 tons is most appropriate by projecting potential net revenue outcomes and their likelihood of occurrence. Craig's decision tools include a contributing factor diagram, decision trees, and payoff matrices.

Date: 2004
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