Which option has the highest expected monetary value

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Reference no: EM132300192

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 $560 each, with a probability of 0.37 and a 0.63 probability of 75,000 at $560. If, however, he uses the value analysis team (option b), the firm expects sales of 90,000 units at $710, with a probability of 0.72 and a 0.28 probability of 60,000 units at $710. Value engineering, at a cost of $105,000, is only used in option b. Which option has the highest expected monetary value (EMV). The EMV for option a is $____ and the EMV for option b is $____. ?Therefore, option ____ has the highest expected monetary value. (Enter your responses as integers.)

Reference no: EM132300192

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