Bill Machine Tools needs to purchase a new machine. The basic model is slower but costs less, whereas the advanced model is faster but costs more. Profitability will depend on future demand. The following table presents an estimate of profits over the next three years.

	Demand Volume
Decision	Low		Medium		High
Basic model	$60,000		$130,000		$165,000
Advanced model	$45,000		$110,000		$210,000

QUESTION 1:

Calculate the amounts foregone by not adopting the optimal course of action for each possible demand level. Determine the maximum opportunity cost for each model. Fill in the table below. If your answer is zero, enter "0". Round your answers to the nearest dollar.

Opportunity Loss Matrix		Future events
Decision alternative	Low	Medium	High	Maximum
Basic model	$	$	$	$
Advanced model	$	$	$	$

Decision Analysis Cengage Learning Enter the data only in the yellow cells. Not for commercial use. This template is designed to allow up to 5 decision alternatives and future events. Enter names of decision alternatives and future events in the appropriate cells in column A or k and row 7. Probabilities are optional. Payoff Table Decision Alternative Expand existing plant Build new plant Future Events Low Product Demand High Product Demand $200,000.00 $300,000.00 $100,000.00 $450,000.00 Maximum Minimum Expected Value $300,000.00 $200,000.00 $450,000.00 $100,000.00 Probability Maximum Expected Value $0.00 Opportunity Loss Matrix Decision Alternative Expand existing plant Build new plant Future Events Low Product Demand High Product Demand $0.00 $150,000.00 $100,000.00 $0.00 Maximum $150,000.00 $100,000.00 Maximax Decision Maximin Decision Opportunity Loss Decision Expected Value Decision EVPI Build new plant Expand existing plant Build new plant #N/A #N/A