Company is deciding which of two processes to implement

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A company is deciding which of two processes to implement. Both processes will satisfy the same requirement for the next five years. Process 1 implementation cost is $3000 and has a maintenance yearly cost of $400. Process 2 implementation cost is $4500, and its maintenance cost is random: 35% chance it will be $300, 45% it will be $375, and 20% it will be $500. Before the implementation is made, the company can have a specialist evaluate the reliability of each process. If the specialist believes that Process 2 is highly reliable, there is a 60% chance that its annual maintenance cost will be $0, and a 40% chance it will be $375. If the specialist believes that Process 2 is unreliable, there is a 20% chance that the annual maintenance cost will be $0, a 40% chance it will be $375, and a 40% chance it will be $500. Assume the specialist charges $200 for his/her assessment, explain what should be the company’s decision.

Reference no: EM131563540

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