decision theory, Operation Management, History

Write question herA 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 $41 million. If demand turns out to be high, the firm can either subcontract and realize the net present value of $41 million or expand greatly for a net present value of $46 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 $17 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 $58 million.


If the firm builds a large facility and demand is low, the net present value will be -$16 million, whereas high demand will result in a net present value of $76 million.


b. What is the maximin alternative? (Enter your answers in millions rounded to nearest whole number. Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)



Build a large facility $ million.
Build a small facility $ million.

--------------------------------------------------------------------------------


c. Compute the EVPI. (Enter your answers in millions of dollars rounded to 2 decimal places. Omit the "$" sign in your response.)



EVPI $ million.

--------------------------------------------------------------------------------


d. Perform sensitivity analysis on P (high). (Round "x" answer to 2 decimal places. Negative amount should be indicated by a minus sign.)


I Small + x
II Medium + x
III Large + x

--------------------------------------------------------------------------------


e
Posted Date: 1/30/2012 4:50:52 PM | Location : United States







Related Discussions:- decision theory, Operation Management, Assignment Help, Ask Question on decision theory, Operation Management, Get Answer, Expert's Help, decision theory, Operation Management Discussions

Write discussion on decision theory, Operation Management
Your posts are moderated
Related Questions
Ancient Greek Music-Anonymous: "Epitaph for Seikilos" Read more about the history of Greek music (see Pythagoras, Aristoxenus, Cleonides, Aristides Quintilianus). What similarities

A well-written essay, please respond to the following prompts: 1) What do you think about the role of government and politics in your life? 2) What do you know about government and

describe, explain, and analyze the role of the orthodox church in russian affairs from vladimir 1 through catherine the great

Geography and history how did both Greece and Rome benefit from their location on the Mediterranean sea

1. Compare and contrast the ways that patriotism and nationalism motivated both Confederate and Union soldiers. What did Confederate soldiers believe they were fighting for? How di

Described the Spanish conquest in Mexico

The struggle over Palestine started more than a hundred years ago. A little more than fifty years later a Jewish state was formed while we are still seeing the painful birth of a P

In what ways did the activities of African Americans push colonists toward independence even though it is not directly addressed in the Declaration of Independence? Why was the Dec

Compare the federal government's paternalistic attitude and the concept of Self-Determination. Why would the U.S. government treat Indians as if they were children? Why would the C

The documentary, Incident at Oglala, argues for self defense because ... A) American Indian Movement (AIM) members do not fight offensive battles. B) American Indian Movement (A