Formulate a linear programming model

Reference no: EM13264171

Formulate a Linear Programming model for the following situation:

The management teams of a manufacturer of space heaters were trying to decide whether to release a revolutionary new heater, or whether to continue testing it. Releasing it immediately would ensure good sales, as no other manufacturers had anything like it. However, this would be at an estimated 10% risk of serious problems which would result in halving the revenue. Another six months testing would reduce the chance of problems to 5%, but at an estimated 8% risk of a comparable heater being introduced by the competition.”

Using the previous probabilities and codes, formulate this problem as a Decision Tree model, and calculate the Expected Monetary Value (EMV) of the options in order to help decide what to do.

Reference no: EM13264171

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