Calculate the expected value, Operation Management

Assignment Help:

C and S Metal company produces stainless steel pots and pans. C and S can pursue either of two distribution plans for the coming year. The firm can either produce pots and pans for sale under a discount store label or manufacture a higher quality line for speciality stores and expensive mail order catalogues. High initial set-up costs along with C and S's limited capacity make it impossible for the firm to produce both lines. Profits under each plan depend upon the state of the economy. One of the three conditions will prevail:

Growth (probability = 0.3)

Normal (probability = 0.5)

Recession (probability = 0.2)

The outcome under each plan for each state of the economy is given in the table below. Figures in the table are profits measured in dollars. The probabilities for each economic condition represent crude estimates.

Economic condition

Discount line

Speciality line

Growth

Normal

Recession

250,000

220,000

140,000

400,000

230,000

20,000

(a) Calculate the expected value for each alternative.

(b) Which alternative is more risky?

(c) Taking into account the importance of risk, which alternative should an investor choose?


Related Discussions:- Calculate the expected value

, What happens if balance doesn’t exis

What happens if balance doesn’t exist

Explain what is the horizon value, Current and projected cash flows for Ran...

Current and projected cash flows for Randell Global Operatons are shown below. Growth is expected to be constant after 2012, and the weighted average cost of capital is 11%. What i

Explain personal computers and airline travel, Are the following global ind...

Are the following global industries or multi domestic industries: bulk chemicals, pharmaceuticals, branded food products, moviemaking, television manufacture, personal computers an

Explain government use to facilitate economic development, Reflect upon the...

Reflect upon the IT strategies that are used to encourage economic development. Select two strategies and discuss how economic factors affect the strategies that a government may u

Define performance appraisals are they necessary or not, Performance Apprai...

Performance Appraisals- 1. What purpose do they serve under a performance management system? 2. Performance appraisals are they necessary or not? 3. What to do if a perfor

Marketers position and distinguish their company’s products, How do markete...

How do marketers position and differentiate their company's products/services relative to competition?

#titCAREING FOR TODDLERle.., HOW TO CARE FOR A TODDLERn #Minimum 100 words ...

HOW TO CARE FOR A TODDLERn #Minimum 100 words accepted#

Explain which style did you find most effective, Think back to teachers you...

Think back to teachers you have had, and identify one each who fits a supportive style, directive style, participative style, and achievement-oriented style according to the path-g

Service process design, the main factors that influence the service process...

the main factors that influence the service process design.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd