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 .40, .35, and .25, respectively.

A small facility is expected to earn an after tax net present value of just $14,000 if demand is low. If demand is average, the small facility is expected to earn $15,000, it can be increased to medium size to earn a net present value of 40,000. If demand is high, the small facility is expected to earn 25,000 and can be expanded to medium size to earn $60,000 or to large size to earn 150,000.

A medium size facility is expected to lose an estimated $25,000 if demand is low, earn 90,000 if the demand is average. If the demand is high, the medium sized is expected to earn a net present value of 100,000. It can be expanded to a large size for a net payoff of 155,000.

If a large facility is build and demand is high, earning are expected to be 170,000. If 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 70,000.

Which alternative is best according to each of the following decision criteria? (enter responses as whole numbers)

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