Reference no: EM132300165

1 You are a new(ish) engineering manager in your company. You are charged with making a decision. You are trying to help you company is trying to decide whether to bid for a certain contract or not. They estimate that merely preparing the bid will cost $10,000 in resources which would otherwise return 50% in profit returns by doing another project. However, If their company bid then they estimate that there is a 50% chance that their bid will be put on the "short-list", otherwise their bid will be rejected. Once "short-listed" the company will have to supply further detailed information (entailing costs estimated at $5,000). After this stage their bid will either be accepted or rejected. The company estimates that the labour and material costs associated with the contract are $127,000. They are considering three possible bid prices, namely $155,000, $170,000 and $190,000. They estimate that the probability of these bids being accepted (once they have been short-listed) is 0.90, 0.75 and 0.35 respectively. Once short-listed, the company can still choose to abandon bidding the contract. What should the company do and what is the expected monetary value of your suggested course of action? This is a decision tree problem. Show all work.