Question

Suppose a manufacturing plant is considering three options for expansion. The first one is to expand into a new plant (large), the second to add on third-shift to the daily schedule (medium), and the third to do nothing (small). There are three possibilities for demand. These are high, medium, and low with the probability of .5 (H), .25 (M), .25 (L) of occurring. Suppose that the profits for the expansion plans are as follows (respective to high, medium, low demand). The large expansion profits are $100000, $10000, -$10000, the medium expansion choice $40000, $40000, $5000 and the small expansion choice $15000, $15000, $15000.

a. What is the highest EMV?                            [ Select ]                       ["55000", "35600", "45000", "50000"]      

b. What is the EVwPI?                            [ Select ]                       ["63750", "65777", "35800", "50000"]      

c. What is the organization willing to pay for perfect information?                            [ Select ]                       ["14500", "9700", "10800", "13750"]      

d. Which of the expansion plans should the manager choose?  [ Select ] [Small, Medium, Large]

Answer 1

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