Firm builds small facility and demand turns out to be low

Assignment Help Operation Management
Reference no: EM131159087

A firm must decide whether to construct a small, medium, or large stamping plant. A consultant’s report indicates a .20 probability that demand will be low and an .80 probability that demand will be high. If the firm builds a small facility and demand turns out to be low, the net present value will be $42 million. If demand turns out to be high, the firm can either subcontract and realize the net present value of $42 million or expand greatly for a net present value of $48 million. The firm could build a medium-size facility as a hedge: If demand turns out to be low, its net present value is estimated at $22 million; if demand turns out to be high, the firm could do nothing and realize a net present value of $46 million, or it could expand and realize a net present value of $50 million. If the firm builds a large facility and demand is low, the net present value will be −$20 million, whereas high demand will result in a net present value of $72 million. Perform sensitivity analysis on P (high). (Round your answers to nearest whole number. Negative amount should be indicated by a minus sign.) Intercept Slope I Small + x II Medium + x III Large + x Small and large EV same at x = million.

Reference no: EM131159087

How many tires should rock mountain order each time

Rocky Mountain Tire Center sells 10,000 go-cart tires per year. The ordering cost for each order is $35 , and the holding cost is 50% of the purchase price of the tires per ye

Recommendation of a low-labor-cost country based on inputs

Outsourcing, especially to low labor-cost countries, has grown substantially. Be sure to address the following in your paper: Analyze the trade-offs between inputs for the pro

Dramatic improvements in productivity and quality

Which of the following is defined as fully understanding the goals of a process and then dramatically redesigning it from the ground up to achieve dramatic improvements in pro

Explain pattern of organizing information

Explain the 1-2-3 pattern of organizing information with the help of an example, In order for a presentation to be effective, it requires structured and organized information

Illustrate role of business in economy

Illustrate role of business in economy. Select an organization with which you are familiar also discuss impact of that organization's level of social responsibility on a stak

Analyse how management and leadership are conceptualised

Analyse how management and leadership are conceptualised in a number of different ways. How are leadership and management talent developed in your organisation? Is learning un

Shopping products-specialty products and unsought products

Marketing: A consumer product is bought to satisfy an individual’s personal wants. Although there are several ways to classify them, the most popular approach includes these f

Stochastic single-period model for perishable products

Swanson's Bakery is well known for producing the best fresh bread in the city, so the sales are very substantial. The daily demand for its fresh bread has a uniform distributi

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd