Which option has the highest expected monetary value

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MacDonald Products, Inc., of Clarkson, New York, has the option of ( a) proceeding immediately with production of a new top- of- the- line stereo TV that has just 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 80,000 units at $ 510 each, with a probability of 0.29, and a 0.71 probability of 70,000 at $ 510. If, however, he uses the value analysis team (option b), the firm expects sales of 90,000 units at $ 770, with a probability of 0.71, and a 0.29 probability of 60,000 units at $ 770. Value analysis, at a cost of $ 100,000, is only used in option b. Which option has the highest expected monetary value (EMV)?

Reference no: EM131142979

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