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
Debates over "internal improvements" during the Jacksonian Era were primarily about... A. Whether canal or railroad travel would be most efficient. B. Whether cotton or wheat pr

One of imperialism's most virulent detractors was the British economist John Hobson (1858-1940). Having observed British imperial rule in South Africa, Hobson became an early crit

is it true that a dispute between some poor colonists and Virginias governor over Native Americans land sparked Powhatans rebellion in 1676.

what are two key elements that led american colonist to the boston tea party and eventually to the american revolution

What were the long term results for Spain and for England of the defeat of the Spanish Armada? It was a battle Elizabeth I had sought to avoid, yet in its aftermath she had more

Evaluate the social and political tensions in the United States uncovered by World War One.

given the enormous military superiority of the united states at the the end of WWII, do you think it would have been possible to avoid the postwar division of the world into two ho

Discuss what impact did the changes in the economy have on the institution of slavery and the lives of the slaves?


The Emperor Charlemagne spread Christianity among the Saxons by A. imposing taxes on those who didn't convert. B. by way of exemplary faith that set an example. C. giving pagans