Compute the npv, Operation Management

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 two options. The first is a small facility that it could build at a cost of $8 million. If demand for new products is low, the company expects to receive $10 million in discounted revenues (present value of future revenues) with the small facility. On the other hand, if demand is high, it expects $11 million in discounted revenues using the small facility. The second option is to build a large factory at a cost of $9 million. Were demand to be low, the company would expect $11 million in discounted revenues with the large plant. If demand is high, the company estimates that the discounted revenues would be $15 million. In either case, the probability of demand being high is .80, and the probability of it being low is .20. Not constructing a new factory would result in no additional revenue being generated because the current factories cannot produce these new products.

a. Calculate the NPV for the following: (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in millions rounded to 1 decimal place.)

Posted Date: 2/10/2014 11:16:18 PM | Location : United States







Related Discussions:- Compute the npv, Assignment Help, Ask Question on Compute the npv, Get Answer, Expert's Help, Compute the npv Discussions

Write discussion on Compute the npv
Your posts are moderated
Related Questions
Answer the following questions on the Topic of The History of the American Corporation 1-Describe what is the rule of law and its importance on a successful capitalistic society

Klein Karpet cleaned 65 rungs in October, consuming the following resources: Labour: 520 hours at$13 per hour Solvent: 100 gallons at $5 per gallon Machine rental: 20 days at $50 p

Where was the world's first air raid in 1849 from hot air balloons?

Suppose the length of critical path in a project is 40 days and the standard deviation is 2 days. What due date should be set for the project so that the probability of completing

You have a lease on an oil and gas property with 87.5% NRI that delivers your firm annual profits of $400,000 for five years, with equal production in each year (you will need to t

Most organizations possess some formal organizational chart showing the established lines of authority and the division of labour. Generally, formal processes of communication are

One of the most influential pieces of legislation was the Sarbanes-Oxley Act of 2002. This act greatly increased the transparency of financial disclosure in light of accounting sca

Long term Capacity Expansion For the purpose of expansion of the long term capacity of the term the firm may decide to adapt and one more of the followings. 1.The firm may give

impact of computer integration in operation management

Kentwood Electronics manufactures three components for stereo systems: CD players, tape decks, and stereo tuners. The wholesale price and manufacturing cost of each item are: Compo