A company specializing in earth-moving equipment is

Assignment Help Corporate Finance

Reference no: EM13371250

A company specializing in earth-moving equipment is contemplating expanding its operations. It must decide whether to build a large plant or a small plant.

There is a 60% chance that demand for the equipment will be strong and a 40% chance that demand will be weak. If a large plant is built, a profit of $10 million will result if demand is large. and a profit of only $1 million if demand is weak. If the company builds a small plant and the demand is weak, profits of $4 million will be made.

If demand is strong and the company has a small plant, the likelihood of competition is greater. Should there be competition arising in the company could either build another smaller plant in a different area or expand the existing plant. If the company decides not to invest in another plant, profits of $6 million is expected, whether there is competition or not.

If there is competition, either form of expansion is expected to yield a profit of $8 million with a70% probability, and a profit of $6 million with a 30% probability. If there is no competition, building a separate plant would yield a profit $9 million with a 80% probability and a profit of $7 million with a 20% probability.

Expanding the existing plant is expected to yield a profit of $7.5 million.

With the aid of a decision tree, prepare a quantitative report advising the company on the best course of action.

Reference no: EM13371250

Questions Cloud

1 describe the role and importance of communication in the : 1. describe the role and importance of communication in the managers job. communication is the process of transmitting

1 consider the following distribution of grades in a : 1. consider the following distribution of grades in a class.nbsp think of this as your population.3540 2 3 4 4 550 0 0

The mock data file consists of 3 columns each containing : the mock data file consists of 3 columns each containing 1000 numbers1. a flag indicating which data row2. the sampled

Question 1 variable xx lt- c3 4 8 4 2 1 0 6 variable yy lt- : question 1 variable xx lt- c3 4 8 4 2 1 0 6 variable yy lt- c1 2 4 2 2 0 1 4 calculate z-scores for all values in the

A company specializing in earth-moving equipment is : a company specializing in earth-moving equipment is contemplating expanding its operations. it must decide whether to

Explain the process for handling conflicts taking place in : explain the process for handling conflicts taking place in the organization.analyze the elements of organizational

New keynesian model with technology shocks consider a new : new keynesian model with technology shocks consider a new keynesian economy with equilibrium conditions given bywhere

Task 1part onea research strategy is a plan of action that : task 1part onea research strategy is a plan of action that gives direction to your efforts enabling you to conduct your

User Account

All Pages