Expected value of perfect information on the revenue

Assignment Help Operation Management

Reference no: EM132260154

A company needs to choose a site. Factory Site 1 costs $100K and will generate a revenue of $300K with probability 0.1, $200K with probability 0.2, $100K with probability 0.6, and zero with probability 0.1. Factory Site 2 costs only $10K and will generate a revenue of $60K with probability 0.7 and zero with probability 0.3. The amounts of raw material used at these two sites are independent, so the revenues are independent. The company needs to choose exactly one site.

(a) What is the expected value of perfect information on the revenue from factory Site 1?

(b) What is the expected value of perfect information on the revenue from factory Site 2?

(c) What is the expected value of perfect information on the revenue from factory Site 1 and the revenue from factory Site 2?

(d) Discuss how the value in (c) compares with the values in (a)-(b) and with the sum of these two.

(e) How would your calculations in (a)-(c) change if the revenues from the two sites were dependent?

Reference no: EM132260154

Questions Cloud

Prepare a five column trial balance : Accounting 105 Assignment - Company Spreadsheet Project. Prepare a 5 column trial balance. Write a short evaluation about the company

Program that converts from kilometers-to-miles : Write a program that prompts the user to select either Miles-to-Kilometers or Kilometers-to-Miles, then asks the user to enter the distance they wish to convert

What was your capstone experience like : PSY 790 Overall, what was your capstone experience like? Reflect on the significance of the capstone in relation to your own experience at SNHU.

Display the original value and its unit : Write two functions that each accept a distance as an argument, one that converts from Miles-to-Kilometers and another that converts from Kilometers-to-Miles

Expected value of perfect information on the revenue : What is the expected value of perfect information on the revenue from factory Site 1?

What thinking barriers were you able to identify : Identify an organization that you believe has its potential limited by its culture’s barriers to thinking. What thinking barriers were you able to identify?

In the business administration and management profession : In the Business Administration and Management Profession

How hp is following the four steps for fostering innovation : How Meg Whitman could use Lewin’s and Kotter’s models of change to increase the probability of achieveing positive organizational change.

What will you do to ensure relevant financial management : How and to what extent are financial controls critical to your organization? Why? What will you do to ensure relevant financial management?

User Account

All Pages