1. Manuel Castro, a dependable operations manager's staff, has gathered the information below for four production alternatives (A, B, C, and D) that vary by production technology and the capacity of the machinery. All choices enable the same level of total production and have the same lifetime. The four states of nature represent four levels of consumer acceptance of the firm's products. Values in the table are the net present value of future profits in millions of dollars.

	States of Nature
	1	2	3	4
Alternative A	50	55	60	65
Alternative B	30	50	80	130
Alternative C	70	80	70	65
Alternative D	-100	-10	150	220

a. Assuming a maximax strategy, which alternative would be chosen?

b. If maximin strategy were used, which would be chosen?

2. An operations manager's staff has compiled the information below for four manufacturing alternatives (E, F, G, and H) that vary by production technology and the capacity of the machinery. All choices enable the same level of total production and have the same lifetime. The four states of nature represent four levels of consumer acceptance of the firm's products. Values in the table are the net present value of future profits in millions of dollars. Forecasts indicate that there is a 0.1 probability of acceptance level 1, 0.2 chance of acceptance level 2, 0.4 chance of acceptance level 3, and 0.3 change of acceptance level 4.

	States of Nature
	1	2	3	4
Alternative E	50	50	70	60
Alternative F	30	50	80	130
Alternative G	70	80	70	60
Alternative H	-140	-10	150	220

a. Using the criterion of expected monetary value, which production alternative should be chosen?