Management do to achieve the highest expected payoff

Assignment Help Operation Management

Reference no: EM131695002

Supplement A: A firm that plans to expand its product line must decide whether to build a small, medium, or large production facility. A consultant’s report indicates a 0.60 probability that demand will high and a 0.40 probability that demand will be low. If the firm builds a small-size facility and demand is low, the firm is expected to earn $40 million. If demand turns out to be high, the firm can either subcontract and earn $75 million or expand the facility to earn $100 million. If the firm builds a medium-size facility and demand is low, then the firm is expected to earn $30 million. If demand turns out to be high, the firm can either do nothing and earn $100 million or can expand the facility to earn $120 million. If the firm builds a large-size facility and demand is low, the firm is expected to lose an estimated value of $20 million. If demand is high, earnings are expected to be $150 million

a) Draw a complete decision tree for this problem. Clearly present the decision and event nodes, the associated probabilities, and the payoffs.

b) What should the management do to achieve the highest expected payoff?

Reference no: EM131695002

Questions Cloud

Discuss the different bases of departmentalization : Describe the organizational structure that results from each of the different bases of departmentalization. What implications does each of these structures.

Speculate two of the management teams : Speculate two (2) of the management teams' objections the union is likely to face. Develop two (2) arguments to counter the management position.

Quality of the following systems to the building : How do I do a checklist to ensure the quality of each of the following systems to the building (house) for the footing, floor, walls and roof?

Develop organization charts for each organization : Contact two very different local organizations (retailing firm, manufacturing firm, church, civic club, and so on) and interview top managers to develop.

Management do to achieve the highest expected payoff : A firm that plans to expand its product line must decide whether to build a small, What should the management do to achieve the highest expected payoff?

Do licensure and other professional regulations : Do licensure and other professional regulations (in healthcare) serve the public as much as they serve the self interest of those already in the various

Discuss cerebral laterality between males and females : According to brain research (Jensen, 2008), there are known differences in cerebral laterality between males and females. Although our brains are unique

Recommend other potential target market segments : Recommend other potential target market segments.

How might genes be transferred between bacterial species : How might genes, such as those responsible for drug resistance, be transferred between bacterial species

User Account

All Pages