Question: ABC Inc. must make a decision on its current capacity for next year. Estimated profits ( in $ 0 0 0 s ) based on
ABC Inc. must make a decision on its current capacity for next year. Estimated profits in $s based on next year's demand are shown in the table below.
Next Year's Demand
Alternative Low High
Expand $ $
Subcontract $ $
Do nothing $ $
Refer to the information above. Assume that ABC Inc. has hired a marketing research firm that provided additional information regarding next year's demand. Suppose that the probabilities of low and high demand are assessed as follows: PLow and PHigh
What is the expected value under certainty?
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