Question: A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low, average, or high with the estimated
A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low, average, or high with the estimated probabilities being 0.40,0.35, and 0.25, respectively. A small facility is expected to eam an after-tax net present value of just $11,000 if demand is low. If demand is averag. the small facility is expected to earn $15,000; it can be increased to medium size to earn a net present value of $50,000. If demand is high, the small facility is expected to eam $25,000 and can be expanded to medium size to earr $70,000 or to large size to eam $150,000. A medium-sized facility is expected to lose an estimated $25,000 if demand is low and eam $90,000 if demand is average. If demand is high, the medium-sized facility is expected to earn a net present value of $125,000; it can be expanded to a large size for a net payoff of $155,000. If a large facility is built and demand is high, earnings are expected to be $170,000 IIf demand is average for the large facility, the present value is expected to be $80,000; if demand is low, the facility is expected to lose $40,000. Which alternative is best according to each of the following decision criterion? (Enter your responses as whole numbers.) A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low, average, or high with the estimated probabilities being 0.40,0.35, and 0.25, respectively. A small facility is expected to eam an after-tax net present value of just $11,000 if demand is low. If demand is averag. the small facility is expected to earn $15,000; it can be increased to medium size to earn a net present value of $50,000. If demand is high, the small facility is expected to eam $25,000 and can be expanded to medium size to earr $70,000 or to large size to eam $150,000. A medium-sized facility is expected to lose an estimated $25,000 if demand is low and eam $90,000 if demand is average. If demand is high, the medium-sized facility is expected to earn a net present value of $125,000; it can be expanded to a large size for a net payoff of $155,000. If a large facility is built and demand is high, earnings are expected to be $170,000 IIf demand is average for the large facility, the present value is expected to be $80,000; if demand is low, the facility is expected to lose $40,000. Which alternative is best according to each of the following decision criterion? (Enter your responses as whole numbers.)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
