Please provide correct answer for part B.
A manager is trying to decide whether to buy one machine or two. If only one is purchased and demand proves to be excessive, the second machine can be purchased later. Some sales will be lost, however, because the lead time for producing this type of machine is six months. In addition, the cost per machine will be lower if both are purchased at the same time.
The probability of low demand is estimated to be 0.30. The after-tax net present value of the benefits from purchasing the two machines together is $ 70000 if demand is low and $ 170000 if demand is high.
If one machine is purchased and demand is low, the net present value is $120,000. If demand is high, the manager has three options. Doing nothing has a net present value of $ 100,000; subcontracting, $150,000; and buying the second machine, $130,000.
a. Choose the correct decision tree for this problem. Note that
each payoff is given in thousands of dollars.
b. How many machines should the company buy initially?
What is the expected payoff for this alternative?
Please provide correct answer for part B. A manager is trying to decide whether to buy...
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 6 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 0.30...
A manager must decide how many machines of a certain type to buy. The machines will be used to manufacture a new gear for which there is increase demand. The manager has narrowed the decision to two alternatives; buy one machine or buy two. If only one machine is purchased and demand is more than it can handle, a second machine can be purchased at a later time. however, the cost per machine would be lower if the two machines...
Question Completion Status: QUESTION 3 A manager must decide how many machines of a certain type to buy. The machines will be used to manufacture a new gear for which there is increased demand. The manager has narrowed the decision to two alternatives: buy one machine or buy two. If only one machine is purchased and demand is more than it can handle, a second machine can be purchased at a later time. However, the cost per machine would be...
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...
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Limousine Inc. must decide how many new limousines to buy. The owner has narrowed down the decision to two choices: buy one limousine or two limousines. If only one limousine is bought and demand ridership is high, a second limousine can be bought later. The probability of high demand is ridership 0.65, and the probability of low demand ridership is 0.35. The net present value obtained with the purchase of two limousines is $100,000 if demand is high and $65,000...
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please help!! im so confused will give good rating! (6) A manager is deciding whether or not to build a small facility. Demand is uncertain and can be either at a high or low level. If the manager chooses a small facility and demand is low, the payoff is $360. If the manager chooses a small facility and demand is high, the payoff is $100. On the other hand, if the manager chooses a large facility and demand is low,...