Expected value of building-acadia logistics

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Acadia Logistics anticipates that it will need more distribution center space to accommodate what it believes will be a significant increase in demand for its? final-mile services. Acadia could either lease public warehouse space to cover all levels of demand or construct its own distribution center to meet a specified level of? demand, and then use public warehousing to cover the rest. The yearly cost of building and operating its own? facility, including the amortized cost of? construction, is ?$10.50 per square foot. The yearly cost of leasing public warehouse space is ?$19.50 per square foot.

The expected demand requirements:

Requirements (in sq. ft) 140,000 340,000 540,000 740,000

Probability 0.3 0.35 0.2 0.15

a. The expected value of leasing public warehouse space as required by demand is

b. The expected value of building a 140,000?-square-foot distribution center and leasing public warehouse space as required if demand exceeds the need for 140,000 square feet of space is

Reference no: EM132723330

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