How could this information be used

Assignment Help Operation Management
Reference no: EM13914399

A firm that plans to expand its product line must decide whether to build a small or a large facility to produce the new products. If it builds a small facility and demand is low, the net present value after deducting for building costs will be $ 400,000. If demand is high, the firm can either maintain the small facility or expand it. Expansion would have a net present value of $ 450,000, and maintaining the small facility would have a net present value of $ 50,000.
If a large facility is built and demand is high, the estimated net present value is $ 800,000. If demand turns out to be low, the net present value will be  $10,000. The probability that demand will be high is estimated to be .60, and the probability of low demand is estimated to be .40.
a. Analyze using a tree diagram.
b. Compute the EVPI. How could this information be used?
c. Determine the range over which each alternative would be best in terms of the value of P (demand low).

Reference no: EM13914399

Questions Cloud

Erikson generativity versus stagnation stage : Compare and contrast Erikson's generativity versus stagnation stage with his ego integrity versus despair stage for middle and late adulthood. What occurrences can affect positive or negative outcomes?
Explain how interpersonal relationships : Explain how interpersonal relationships, including those from family and school, experience growth from those from childhood to adolescence to adulthood. Describe a relevant example of each.
Social and personality development of the infant : Compare and contrast the following populations with the use of meaningful examples for each stage of development. Social and personality development of the infant and the psychosocial, social, and moral development of the preschool child.
S03 human growth and development i : S03 Human Growth and Development I, Consider the lifespan development process and describe the following changes in the infant from content supported in your text.
How could this information be used : Analyze using a tree diagram. Compute the EVPI. How could this information be used? Determine the range over which each alternative would be best in terms of the value of P (demand low).
Would the alternative of doing nothing be best : Refer to Problems 1 and 2. Construct a graph that will enable you to perform sensitivity analysis on the problem. Over what range of P (high) would the alternative of doing nothing be best? Expand? Subcontract?
Analyze the problem using a decision tree : Determine the expected profit of each alternative. Which alternative is best? Why? Analyze the problem using a decision tree. Show the expected profit of each alternative on the tree.
A small building contractor has recently experienced : A small building contractor has recently experienced two successive years in which work opportunities exceeded the firm capacity. The contractor must now make a decision on capacity for next year.
Identify three potential unethical actions or inactions : Identify three potential unethical actions or inactions related to decision analysis and the ethical principle each violates.

Reviews

Write a Review

Operation Management Questions & Answers

  Formulate the linear programming model for problem

Formulate the linear programming model for problem providing the objective function and the constraints and the definition of the variables - How many reams should be ordered at a time?

  Gallon of unleaded regular gasoline

According to a study, the mean price of s gallon of unleaded regular gasoline in the United States is $2.45. A s sample of 25 Chicago area gas stations shows the mean price of $2.55. the standard deviation of the population is known to be $0.50. Deve..

  The manufacturing costs for these products are computed by

frigid air company produces three different types of industrial refrigerators a b and c. the production capacity of the

  Constructive dialogue and changing strategic direction

Why are constructive dialogue and/or changing strategic direction more difficult for a family business than other businesses, even though families are supposed to have closer relationships? Support your response with empirical evidence.

  Field knocking on doors-visiting businesses or holding sales

_____ is the type of retailing focused on selling goods and services by employing personal selling representatives that work in the field knocking on doors, visiting businesses, or holding sales events.

  During the business hours all customers have appointment

During the business hours, all the customers have appointments and the shop has one customer exactly every 20 min. . The average service time is 36 min. With a standard deviation of 6 min. Assume that all the customers are indifferent among the 2..

  Technology impact on human resources

THREE advantages and THREE disadvantages to utilizing Applicant Tracking Systems. Next, suggest TWO potential solutions for improving Human Resource Information Systems operations.

  First emerging as the dominant form of health insurance

When managed care was first emerging as the dominant form of health insurance, new MCOs competed fiercely for new enrollees, sometimes sacrificing short-term profit to increase their volume of policyholders. Why is the number of policyholders so impo..

  What are some of the common approaches to accomplish

Why should organizations be concerned with quality of their products/services? What are some of the common approaches to accomplish that in recent years. Please describe each briefly.

  Are these measures independent or interdependent

what implications does that fact have for managers wanting to create and sustain a competitive advantage?

  Reimbursement of his expenses in winding up

Byron Bennett and Louis Gagliardi were partners in a law practice. Under their partnership agreement, Gagliardi received 60 percent of partnership profits and Bennett received 40 percent. Was Bennett entitled to compensation for his time spent windin..

  Organizational problems with transnational strategy

What do you see as the main organizational problems that are likely to be associated with implementation of a transnational strategy? Explain.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd