Decide whether to build new state-of-art processing facility

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Reference no: EM132114442

Nathan Savitzky, chief engineer of Abina Electronics, has to decide whether to build a new state-of-the-art processing facility. If the new facility works, the company can realize a profit of $200,000. If it fails, Abina Electronics could lose $180,000. At this time, Savitzky estimates a 60% chance that the new process will fail. The other option is to build a pilot plant and then decide whether to build a complete facility. The pilot plant would cost $15,000 to build. Savitzky estimates a 50-50 chance that the pilot will work and not fail. If the pilot plant works, there is a 75% that the complete plant, if it is built, will work. If the pilot plant fails, there is only a 15% chance that the complete project (if constructed) will work. Savitzky faces a dilemma. Should he build the plant? Should he build the pilot project and then make a decision. Help Savitzky by analyzing the problem. ?Develop a decision tree for this problem and determine the optimal decision strategy. USE THE DRAWING TOOLS IN WORD OR POWERPOINT (OR EXCEL ADD-IN TREEPLAN), CREATE AND SOLVE THE DECISION TREE. SAVE THE FILE AND UPLOAD IT HERE.

Reference no: EM132114442

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