Expected monetary value, MacDonald Products, Inc., of

Expected monetary value

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Reference no: EM13819428

MacDonald Products, Inc., of Clarkson, New York has the option of (a) Proceeding immediately with production of a new top-of-of-the-line stereo TV that has just completed prototype testing or (b) Having the value analysis team complete a study If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 110,000 units at $520 each, with a probability of 0.68 and a 0.32 probability of 65,000 at $520. If, however, he uses the value analysis team (option b), the firm expects sales of 90,000 units at $760, with a probability of 0.72 and a 0.28 probability of 60,000 units at $760. Value engineering, at a cost of $100,000, is only used in option b. Which option has the highest expected monetary value (EMV)? The EMV for option a is $______ and the EMV for option b is $______. Therefore, option _____ has the highest expected monetary value. (enter your responses as integers.)

Reference no: EM13819428

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