Reference no: EM131447632
A manager is trying to decide whether to buy one machine or two. If only one machine is purchased and demand proves to be? excessive, the second machine can be purchased later. Some sales would be? lost, however, because the lead time for delivery of this type of machine is six months. In? addition, the cost per machine will be lower if both machines are purchased at the same time. The probability of low demand is estimated to be 0.20 and that of high demand to be 0.80
The? after-tax NPV of the benefits from purchasing two machines together is $70,000 if demand is low and ?$170,000 if demand is high. If one machine is purchased and demand is? low, the NPV is ?$120,000. If demand is? high, the manager has three? options: (1) doing? nothing, which has an NPV of ?$120,000?; (2) subcontracting, with an NPV of ?$140,000?; and? (3) buying the second? machine, with an NPV of ?$130,000
b. What is the best decision and what is its expected? payoff?
Best decision is to buy ___ ?machine(s) and its expected payoff is ?$________. (Enter your responses as integers.?)
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What is the best decision and what is its expected? payoff
: A manager is trying to decide whether to buy one machine or two. If only one machine is purchased and demand proves to be? excessive, the second machine can be purchased later. Some sales would be? lost, however, because the lead time for delivery of..
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