Regardless of what alternative the company implements

Assignment Help Operation Management

Reference no: EM131116509

Expando, Inc. is considering the possibility of building an additional factory that would produce a new addition to their product line. The company is currently considering three alternatives: build small plant, build large plant, and do nothing. If the company builds the small plant and the demand for the new product is low, then the company expects to receive $10 million in discounted revenues (present value of future revenues) and incur $7 million in discounted costs (initial construction costs plus present value of future cost). If the company builds the small plant and the demand for the new product is high, then the company expects to receive $12 million in discounted revenues and incur $8 million in discounted costs. If the company builds the large plant and the demand for the new product is low, then the company expects to receive $10 million in discounted revenues and incur $9 million in discounted costs. If the company builds the large plant and the demand for the new product is high, then the company expects to receive $14 million in discounted revenues and incur $10 million in discounted costs. If the company does nothing, then no additional revenue would be generated nor additional cost incurred because the current factories cannot produce these new products. Regardless of what alternative the company implements, the probability of demand for the new product being high is 0.40 and the probability of demand for the new product being low is 0.60. Construct a decision tree to help Expando make the best decision. What is the best decision?

Reference no: EM131116509

Questions Cloud

What is the firm inventory turnover : Suppose the revenue for a firm is $8,000,000. Its cost of goods sold is $300,000, and its average inventory value for the year is $100,000. a) What is the firm’s inventory turnover?

Is the defendant restaurant liable for negligence : The plaintiff, while a parton in a restaurant, was shot by an armed robber. The robber was angry because the cashier had locked the cash register and fled. Is the defendant restaurant liable for negligence? why?

Determine the optimal ingredients for its vegetable soup : A soup company wants to determine the optimal ingredients for its vegetable soup. The cost per ounce of the ingredients is $.02 for the vegetables, $.05 for the meat, $.001 for the water, and $.05 for the flavorings. Formulate an LP model that will d..

The cabinet door fell and struck her head : Helen toured a townhouse built by Thames. While inspecting the kitchen, she opened a cabinet; the cabinet door fell and struck her head. An examination revealed that no screws were affixed to the door to secure it to the cabinet. She filed suit again..

Regardless of what alternative the company implements : Expando, Inc. is considering the possibility of building an additional factory that would produce a new addition to their product line. The company is currently considering three alternatives: build small plant, build large plant, and do nothing. Reg..

Describe mechanic lien and artisan lien : Describe a mechanic's lien and an artisan's lien, giving an example of each. Describe the order of priority among the following creditor interests: possessory lien such as an artisan's lien; "regulare lien" created under a security agreement; and a p..

Make to management concerning the process : Calculate the process capability statistics for the outside diameters of the bottles made on the injection molding machine at the Moby Molding Co. (from Prob. 8-36). Use 0.12 as the upper tolerance limit and - 0.10 as the lower tolerance limit for th..

What areas should be covered in the policy : You have just been asked by your department manager to write a violence prevention policy for your department. What areas should be covered in the policy. Include a statement of how a threat to another employee should be handled.

User Account

All Pages