Question

Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers believe that there is a probability of 0.45 that the ATR Co. will come out with a competitive product. If Weiss adds an assembly line for the product and ATR Co. does not follow with a competitive product, Weisss expected profit is $40,000; if Weiss adds an assembly line and ATR follows suit, Weiss still expects $10,000 profit. If Weiss adds a new plant addition and ATR does not produce a competitive product, Weiss expects a profit of $600,000; if ATR does compete for this market, Weiss expects a loss of $120,000

a) Expected value for the Add Assembly Line option = $ ____ (enter your answer as a whole number).

a.1) Expected value for the Build New Plant option = $ _____ (enter your answer as a whole number).

a.2) The alternative that provides Weiss the greatest expected monetary value (EMV) is: add assembly line or build a new plant

a.3) The value of the return under this decision is ?$ ____ ?(enter your answer as a whole? number).

b) The expected value of perfect information ?(EVPI?) for Weiss? = ?$ _____ ?(enter your answer as a whole? number).

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