Scenario 1 (length: as needed) You are considering auctioning a Leonardo Da Vinci original sketch. You entice four bidders to come to your auction. The bidders’ valuations of the sketch in decreasing order are $3.0, $2.2, $2.0, and $1.5 (in millions). · If you used a second-price sealed bid auction, who would win and what would the winning price be? · If you used a first-price sealed bid auction and the optimal strategy for the participants was to shade their bid by 20% and the participants used this strategy, who would win and what would the winning price be? · Which auction should you choose to maximize your profit? Answer the above questions if the valuations of the sketch are $3.0, $2.7, $2.0 and $1.5. Scenario 2 (length: 0.5 page) In the auction described above, suppose that you could entice additional bidders to attend your auction. However, none of the new bidders would have a valuation greater than $3.0 million. Despite that fact, you expect the amount that the winning bidder must pay to increase regardless of the type of auction you use (first- or second-price sealed bid). For each auction, explain why you would expect the auction price to increase. If you want, you may assume the valuations of the original four participants are $3.0, $2.2, $2.0 and $1.5 million. Scenario 3 (length: 0.5 page) Some recent Super Bowl advertisements have spent very little time mentioning anything about their product--or even the name of the company. In particular, the two-minute long Ram Trucks "Farmer" commercial had only a few brief and almost unidentifiable views of their product until the last ten seconds of the commercial. Further, the name of the company was only mentioned in the last five seconds of that commercial. Explain why this commercial demonstrated the concept of signaling described in the textbook. In other words, why should consumers be convinced that a Ram truck is of high quality because of the airing of that commercial? Scenario 4 (length: as needed) Suppose there are two types of people who need health insurance; high-risk and low-risk consumers. High-risk consumers have a relatively high probability of needing expensive medical care and on average incur $2,000 of medical expenses per year. The high-risk consumers would be willing to pay up to $2,500 for insurance that covers all their medical bills. Low-risk consumers would be willing to pay up to $1,500 for full-coverage insurance and on average would incur on average $1,200 in medical bills.  Assume 1/3 of all consumers are high-risk and the remaining 2/3 of consumers are low-risk. Consumers know whether they are high-risk or low-risk. The insurance company knows 2/3 of all consumers are low-risk but cannot identify which consumers are low-risk. 1. If all consumers bought insurance, what price must the insurance company charge to break even in expectation?  That is, what price must the insurance company charge so that the expected payments equals the premium? 2. Which consumers w.

1. Scenario 1 (length: as needed)
You are considering auctioning a Leonardo Da Vinci original
sketch. You entice four bidders to come to your auction. The
bidders’ valuations of the sketch in decreasing order are $3.0,
$2.2, $2.0, and $1.5 (in millions).
· If you used a second-price sealed bid auction, who would win
and what would the winning price be?
· If you used a first-price sealed bid auction and the optimal
strategy for the participants was to shade their bid by 20% and
the participants used this strategy, who would win and what
would the winning price be?
· Which auction should you choose to maximize your profit?
Answer the above questions if the valuations of the sketch are
$3.0, $2.7, $2.0 and $1.5.
Scenario 2 (length: 0.5 page)
In the auction described above, suppose that you could entice
additional bidders to attend your auction. However, none of the
new bidders would have a valuation greater than $3.0 million.
Despite that fact, you expect the amount that the winning bidder
must pay to increase regardless of the type of auction you use
(first- or second-price sealed bid). For each auction, explain
why you would expect the auction price to increase. If you
want, you may assume the valuations of the original four
participants are $3.0, $2.2, $2.0 and $1.5 million.
Scenario 3 (length: 0.5 page)
Some recent Super Bowl advertisements have spent very little
time mentioning anything about their product--or even the name
of the company. In particular, the two-minute long Ram Trucks
"Farmer" commercial had only a few brief and almost
unidentifiable views of their product until the last ten seconds
of the commercial. Further, the name of the company was only
mentioned in the last five seconds of that commercial. Explain
why this commercial demonstrated the concept of signaling
described in the textbook. In other words, why should

2. consumers be convinced that a Ram truck is of high quality
because of the airing of that commercial?
Scenario 4 (length: as needed)
Suppose there are two types of people who need health
insurance; high-risk and low-risk consumers. High-risk
consumers have a relatively high probability of needing
expensive medical care and on average incur $2,000 of medical
expenses per year. The high-risk consumers would be willing to
pay up to $2,500 for insurance that covers all their medical
bills. Low-risk consumers would be willing to pay up to $1,500
for full-coverage insurance and on average would incur on
average $1,200 in medical bills. Assume 1/3 of all consumers
are high-risk and the remaining 2/3 of consumers are low-risk.
Consumers know whether they are high-risk or low-risk. The
insurance company knows 2/3 of all consumers are low-risk but
cannot identify which consumers are low-risk.
1. If all consumers bought insurance, what price must the
insurance company charge to break even in expectation? That
is, what price must the insurance company charge so that the
expected payments equals the premium?
2. Which consumers would purchase insurance at that price?
3. Are there wealth-creating transactions that are not
consummated because of the information asymmetry?
Scenario 5 (length: 0.5 – 1 page)
A struggling company currently has a net worth of $700,000. It
owes $500,000 from debt financing (assume these are loans
from the bank if you wish). The value of the company to the
owners is the difference between the net worth and the amount
owed to the debt holders. What is the current value of the firm
to the owners?
Now assume that a project is presented to the owners that
results in a loss of the entire worth of the company with a
probability of 50% and results in a gain of $500,000 with
probability 50% (resulting in a net worth of $1,200,000). Show
that this in expectation decreases the firm’s value, and explain
why, in spite of that, the owners of the company would want to

3. undertake the project.
Writing Requirements
· Length: as needed (Show your calculations where
appropriate.)
· 1-inch margins
· Double spaced
· 12-point Times New Roman font
General Information
Project Title: Galaxy Industries-Project Management Office
Implementation
Project Working Title: Galaxy PMO
Proponent Secretariat: Mr. Smith, CEO
Proponent Agency: Galaxy Industries
Points of Contact
Project Sponsor: Mr. Smith, CEO Galaxy Ind (916)555-5554
Program Manager: Mr. Brown, CIO Galaxy Ind (916)554-4532
Project Manager: Mr. Beausoleil, PMP PMC (916)443-4434
Customer User: Mrs. White Galaxy Ind. (916)442-
9876Executive Summary
A Project Management Office (PMO) is a group or department
within an enterprise that defines and maintains standards for
project management. The PMO main objective is to standardize
and introduce economies of repetition in the execution of
projects. The PMO is the source of documentation, guidance
and metrics on the practice of project management and
execution.
Project purpose: The purpose of this project is to establish a
PMO for Galaxy. Currently the company is not being very
proficient in the current projects they have established and most
importantly the project managers on staff are not properly
trained or certified. Therefore they do not have the skills to
make sure all the areas required to start, manage, and complete
the projects are being taken care of. Also the project managers
are not centrally located so they can collaborate on issues.
The Aim of this project is to:

4. · Relocate the 3 project managers so they are centrally located.
· Have the three project managers become PMP certified
· Install a software suite to manage projects.
· Install an IS Intranet so that members of Galaxy Industries
will have access to project reports.
· Change the project management methodologies so that they
are in line with PMI Global standards
(http://www.pmi.org/PMBOK-Guide-and-Standards.aspx
· Transition the company from legacy Project management
methodologies to the Project Management Office.Project
Purpose
Business Problem
Galaxy Industries has grown because of the recent increase in
International sales instead of only US Sales as in the past. The
growth rate and subsequent staffing has led to performance
problems in several areas of the business process:
· Inability to process orders within 24 hours.
· Rising transportation costs because of increasing cost of fuel.
· Inadequate employee training.
· Greater demand for internal IT services related to the website,
sales, financial reporting, and warehousing/shipping.
· Inability to keep up with changing IT trends.
· Excessive staff turnover in IT, marketing, and sales.
Project Business Objectives
Commonwealth or Agency Strategic Plan – Initiative or Critical
Issue
Project Business Objectives
Development of PMO
Methodic approach to identifying and resolving problems in
business processes as identified in the Business Problem
statement.
Project Management Intranet Site
Provide a means for employees to stay well informed regarding
the status of project information. Intranet will include:

5. Progress, Problems, Risks and any Outstanding Issues.
Assumptions
· Scope changes must go through a formal review.
· Galaxy industries is willing to change all of its legacy systems
to the new system.
· Galaxy industries will freeze any new projects from going
online till the PMO is implemented.
· Current live Projects will continue on the old system till
completion.
· The old system will remain live till the new system is live and
certified and all pre-PMO projects are complete (system will be
implemented side-by-side).
· Galaxies 3 project managers will pass the PMP certification.
· The Project Team has authority to make business decisions.
· There will be available functional resources provided by
Galaxy industries to the project team.
· Executive support will continue through the project.
· The project sponsors will make timely decisions in order to
facilitate a smooth transition.
· Plan to go live in 90 days from project start.Project
Description
The Implementation of a Project Management Office is a
strategic challenge considering its uses in internal and ongoing
projects. The approach utilized must be very straightforward,
evolving and favorable. It should utilize the required tools and
methods to implement a Project Management Office that helps
the firm order mobility, manage employees and their training
requirements by way of assessments and is helpful in time and
budget management.
As pointed out by the CEO, Mr. Smith, the PMP Certification
should be required to start with the project and the involvement
of each of the three Galaxy’s Project Managers along with
PMC’s Project Manager must be initiated. Each of these must
create a combined strategic framework to complete the project
and achieve the desired results. The top down approach seems
to be favorable here. Implementing the work-management and

6. informational system integrated with the PMO would help the
firm to track the projects employee records. This will manage
the issue of order mobility, save time & money and will also
help in minimizing the employee (IT) personnel turnover. This
easy and user friendly interface based PMO will help the firm to
capitalize on increasing sales and manage the IT services in an
improved and effortless manner.
The website for Project Management will help in tracking the
performance of projects which will assist in better assessment,
implementation and analyzing the factors for improvement. The
inclusion of informational and tracking system in the PMO will
also help the firm complete a daily/weekly basis report of
progress on projects. The location has to be decided with
required infrastructure made available quickly to implement the
PMO soon. This way, the firm will be more responsive to its
customers, able to track delivery faster, provide efficient
operations that lead to cost management. The inclusive training
package (anytime training with videos) will also be able to
manage the training related issues for the firm and help
employee management in efficient methods. The inclusive
marketing module of PMO will also boost the firm’s marketing
capacity and planning with analytics. Therefore including PMO
in Galaxy Industries’ Project Management processes will help
the firm to expand and grow.Project Scope
This project has been established to provide an effective project
management office space, trained individuals and an
Information Technology (IT) solution for our client, Galaxy. In
this project there will be specific objectives tied to strict
resources to ensure we meet the goal of both our organization
and provide a quality product to our client.
This project is essential for Galaxy to move forward with
automating their business and providing a more efficient overall
organizational reliability and effectiveness.
Our project has the following objectives and requirements:
· Training and test vouchers for three project managers to
achieve their Project Management Professional (PMP)

7. certification
· PMP boot camp location, times and costs
· Testing location, times and costs
· Analyze available options for office space and requirements to
convert the space for functionality, co-locating three project
manager
· Acquire and provide logistics for the new office space
(phones, computer equipment, office furniture, power, utilities,
etc.)
· Ensure functionality to support the sales, marketing,
accounting and warehouse components
· Obtain or create Information Technology (IT) solutions for
project management functions
· Develop or acquire project management software (i.e. MS
Project)
· Develop a Project Management intranet site (i.e. MS
SharePoint, etc.) allowing centralized data and information
collaboration and retention
· Create formal project management methodology that outlines
policies and procedures
· Create a schedule and prioritize the objectives outlining clear
deliverables for the client
· Establish conservative compensation packages for the project
managers
Project considerations and restrictions
· Ensure the project maintains effective levels of progress
· Avoid project stalls and pitfalls
· Ensure the project remains within the budgeted allotment
Create a consistent schedule for meetings to keep projects on
task and effectiveProject Authority
Authorization
Galaxy CEO: Mr. John Smith
Galaxy CIO: Mr. Joe Brown
Galaxy COO: Ms. Sue White
Project Manager
Matthew Beausoliel, PMP. His role is to develop a plan for the

8. project coordinate meetings with the stakeholders, provide
meaningful updates, and make any changes that may be
necessary. He is also responsible for tasking his support team
and make sure they have a clear understanding of the assigned
tasks.
Oversight
The Oversight Agency is Galaxy. Galaxy has control of the
funding and controls the timeline in which they want the project
to be complete. The company is in a solid financial situation
and has partnered with CISCO, FedEx, and
HP/IBM/MicrosoftProject Organization
The PMO project is being implemented by the PMC
organization. The PMC organization is using the standard
vertical hierarchical structure for the project. This will
maximize the standards strengths due to the small size of the
project.
The benefit of this organization is the balancing of objectives
and coordination. This works because the support just report
vertically to the project manager and then we can coordinate
with program manager. Then vertically up to the Oversight of
the whole project.
Project Sponsor
John Smith - CEO, Galaxy Industries
Project Director
Matthew Beausoleil - PMC
Project Manager
Matthew Beausoleil - PMC
Team Members
Jequetta Collier, Timothy Chatfield
Customers
Galaxy Industries
Customer Representatives
John Smith, CEO; Joe Brown, CIO; Sue White, COO
Stakeholders
All of the above, plus Galaxy department heads as follows:

9. Sales & Marketing, Shipping & Receiving, IT, HR, Accounting
& Finance
Resources
Resources
Allocation and Source
Funding
Source: General Fund
Amount: $ 170,275.00
Source:
Amount: $
Savings: $ 350,000+
Cost Avoidance Savings: $
Project Team (Full and Part Time Staff)
250 per hour, 1 PM plus two support $62,500
Galaxy 3 PM’s in training lost productivity salaries for 1 week
$5200.00
Customer Support
$25,000 additional support cost while Project management is
changed over to new system. After deliverables (Approx. 100
hrs)
Facilities
$5,000 Office Equipment
Equipment
$50,000 IS upgrades to support Intranet construction
$5,000 Phone , Fax, network services
$10,000site licenses for various software products
Software Tools
Wrike 15 users 99/mo 1 year $1188.00

10. Other
PMI Bootcamp to get the 3 project managers certified in 5 days
3885.00http://www.theknowledgeacademy.com/us/courses/pmp-
certification/pmp-exam-prep-boot-camp/Sacramento/
Hotel located in Sacramento, CA $2502.00 for 6 nights for three
rooms
Signatures
The goal of our project is to provide an effective project
management office space, train individuals and provide an IT
solution for the client, Galaxy. We’ve taken the goals and
created a Work Breakdown Structure (WBS); breaking down the
project into the following main areas and then subdivided them
as accordingly. We have also included a chart that depicts how
the project is broken down.
Train Galaxies Project managers in PMP
1. Create Project Management Office (PMO)
1.1 Training and testing vouchers for three project managers to
achieve their Project Management Professional (PMP)
certification.
1.1.2. Train Project Manager One (PM1)
1.1.2.1. Cost out requirement
1.1.2.2 Set up and schedule time off and studying material
1.1.2.3 Set up and schedule the PMP certification boot camp
1.1.3. Train Project Manager One (PM2)
1.1.3.1. Cost out requirement
1.1.3.2 Set up and schedule time off and studying material
1.1.3.3 Set up and schedule the PMP certification boot camp
1.1.4. Train Project Manager One (PM3)

11. 1.1.4.1. Cost out requirement
1.1.4.2 Set up and schedule time off and studying material
1.1.4.3 Set up and schedule the PMP certification boot camp
Analyze available options for office space and requirements to
convert the space for functionality, co-locating three project
managers.
1.2 Create Office Space at Galaxy Industries
1.2.1 Cost out office equipment and furniture
1.2.2. Order office equipment and furniture
1.2.3 Identify location at Galaxy for PM Office.
1.2.3.1 Clean out any existing fixtures/debris
1.2.3.2 Refurbish space: paint, walls, power, and network
1.2.3.4 Install new furnishings and equipment
1.2.3.4 Move PMs to new office location
Create formal project management methodology that outlines
policies and procedures
1.3 Create PMO Methodologies
1.3.1 Inspect Current "Legacy" Policies and Procedures
1.3.2 Test Methodologies with selected software
1.3.3 Compare performance with company requirements
1.3.4 Approve New methodologies in place of ""legacy""
policies and procedures"
1.3.5 Discontinue Legacy policies and procedures
1.3.6 Institute New PMP methodologies
Develop or acquire project management software (i.e. MS
Project) Develop a Project Management intranet site (i.e. MS
SharePoint, etc.) allowing centralized data and information
collaboration and retention
1.4 Create New Software

12. Solution
1.4.1 Software Requirements Decision
1.4.2 Software Requirements Approval
1.4.3 Purchase Software
Obtain or create Information Technology (IT) solutions for
project management functions.
1.5 Create New IS Infrastructure
1.5.1 Obtain quote for infrastructure from at least three
different vendors
1.5.2 Schedule a site survey for chosen vendor
1.5.3 Schedule installation
1.5.4 Inspect Install and Test equipment
1.5.5 Install PMs IS equipment
Train galaxies staff on new Project management Office
Procedures and Methodologies and associate software
1.6 Train and Support Staff
1.6.1 Create roster for training
1.6.2 Create training plan
1.6.3 Create training schedule

13. 1.6.4 Training group 1
1.6.5 Follow-up group 1
1.6.6 Training group 2
1.6.7 Follow-up group 2
1.6.8 Training group 3
1.6.9 Follow-up group 3