Use the decision tree to determine how many machines

Assignment Help Other Subject
Reference no: EM13319877

1. A manager is trying to decide whether to buy one machine or two. If only one is purchased and demand proves to be excessive, the second machine can be purchased later. Some sales will be lost, however, because the lead time for purchasing this type of machine is 6 months. In addition, the cost per machine will be lower if both are purchased at the same time. The probability of low demand is estimated to be 0.20. The after-tax net present value of the benefits from purchasing the two machines together is $90,000 if demand is low and $180,000 if demand is high.

If one machine is purchased and demand is low, the net present value is $120,000. If demand is high, the manager has three options. Doing nothing has a net present value of $120,000; subcontracting, $160,000; and buying the second machines, $140,000.

a. Draw the decision tree for this problem.

b. Use the decision tree to determine how many machines the company should buy initially and give the expected payoff for this alternative.

Reference no: EM13319877

Suffer from chronic pessimism

Wayne tends to suffer from chronic pessimism, is hypersensitive to rejection, worries obsessively, and is prone to sudden bursts of irrational anger. Wayne is exhibiting the s

Explains the difficulties of global trade negotiations

What explains the difficulties of global trade negotiations and the relative success of regional arrangements? Are regional trade arrangements "just as good" as global/multil

A mention of whether deterrence is a classical concept

Your state has decided to pass a law requiring residents to sort their trash so that recyclable material can be recovered. The purpose of the new law is not really to punish p

Project portfolio management and business strategy

Discuss the linkage between project portfolio management and business strategy with your organisation (current or past). Explain the problems the organisation encounters.

What other questions may you want to ask danny

Identify mental disorders and prevailing views of those disorders. Explore the implications of the many historical and contemporary approaches to addressing abnormal behavior.

Explain the druckers beliefs on not for profit organizations

The problem is from Sociology and the problem is explain the Drucker's beliefs on not for profit organizations such as hospitals and educational institutions. Drucker believ

The annual demand and ordering cost

The annual demand, ordering cost, and the inventory carrying cost rate for a certain item are D = 600 units, S = $20/order and I = 30% of item price. Price is established by t

Decide whether the question is correlational or experimental

Decide whether the question is correlational or experimental. If it is correlational define the 2 variables. If it is experimental, define the the independent and dependent va

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