To buy a new manufacturing operation

Reference no: EM131073641

If you are given a choice to decide whether to buy a new manufacturing operation of one of your competitors in order to expand business. The choices are to buy the complete operation, only the property, or not o buy anything. The results in Rands are summarised in the following table:

Demand	Decision
Demand	Complete Company	Property Only	Nothing
High	200000	100000	20000
Medium	120000	75000	60000
Low	50000	40000	140000

Assuming that the probabilities of high demand, medium and low are 0,4 ; 0,5; and 0,1 respectively.

Economic forecasters anticipate high demand. In the past, if high demand was forecasted, the demand was high 50 % of the time, medium 30 % of the time and low 20 % of the time.

Reference no: EM131073641

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