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
I need help with this: : Compare and contrast the arguments of the speeches of the Compromise of 1850 between Webster, Calhoun and Seward. Which argument do you find the most compe

The Age of Coal and Steel In the first half of the nineteenth century, most of the innovation in English industry was in the production of fabrics, or textiles, especially cott

The American colonists and the British consistently looked at issues from differing viewpoints. Explain their different viewpoints and how each viewed the other.

Does the 1824 Chumash uprising show that the Chumash rejected Catholicism and Spanish rule, or was it an isolated event?

What were the most revolutionary social and economic developments of the last quarter of the nineteenth century? How did different groups of americans respond to those changes and

• Do you agree with the Inquisitor's interrogation of Veronese about his painting, originally titled Last Supper? Or, do you side with Veronese? Explain your response. • As an a

Has the national government been successful in its attempt to provide civil rights for racial minorities or do you see more need?

What are the lasting legacies of the Great Depression and the New Deal?

Protections for civil liberties are almost never absolute. The government has always been willing to weaken protections for civil liberties when other, important considerations dem

The debate over the Constitution is not only crucial to understanding politics in American society in this time, but it is also VERY relevant today. What brought about the drive fo