Moreover the probability of a low demand is 06 the

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Southland Corporation's decision to produce a new line of products resulted in the need to construct either a small factory or a large factory. For a small factory, the projected profit of $15 million in the event of low demand, $20 million in the event of medium demand and $25 million in the event of high demand. For a large factory, the projected profit of $5 million in the event of low demand, $20 million in the event of medium demand and $50 million in the event of high demand. Furthermore, the probability of a low demand is 0.6, the probability of a medium demand is 0.3 and the probability of a high demand is 0.2. What is the optimal decision based on the expected value approach?

Reference no: EM13390223

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