Which option has highest expected monetary value

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Clarkson product, Inc., of Clarkson, New York has the option of (a) proceeding immediately with production of a new top-of- the-line stereo TV that just has completed prototype testing or (b) having the value analysis team complete a study. If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 100,000 units at $550 each, with probability of 0.6 and a 0.4 probability of 75,000 units at $550. If, however, he uses the value analysis team (option b), the firm expect sales of 75,000 units at $750, with probability of 0.7 and a 0.3 probability of 70,000 units at $750. Cost of value analysis is $100,000.

Which option has the highest expected monetary value (EMV)?

Reference no: EM132303460

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