Col. Demgen is leading a technology investment program for the missile defense agency. Five technologies have been proposed:

1. A composite casing for the second stage. It will increase the cost of the stage by $20,000, but the second stage will be lighter, allowing the first stage to be 10% smaller (by mass). The first stage costs $250,000 today.
2. A faster computer can be installed in the onboard tracking system. This will add $250,000 to the cost of each interceptor missile. It will reduce the number of target misses by 5%.
3. An improved maneuvering system. This will increase the probability of hitting a target by 1% (a 0.70 probability of hit will change to a 0.71 probability of success). The cost is $200,000.
4. A commercial inertial navigation package. This will reduce the cost of the missile by $30,000. However, the failure rate of the package is once per 3000 flights, whereas today’s navigation package has never failed.
5. An improved prelaunch built-in test system. This costs $350,000 per unit, but one unit services a battery of four interceptors. It is believed that 2 out of every 100 launches is failing because of problems that could have been identified via a built-in test.

The current interceptor missile costs $1 million and has a 0.92 probability of destroying an inbound enemy missile.

Which technologies should Col. Demgen pursue, and in what order should the selected technologies be applied to the missile?

Use the value model: worth = cost / ln(1-P_s). Note that worth is always negative, so closer to zero is better. Col. Demgen is risk neutral.

Answer rating: 100% (QA)

The worth of a technology is equal to the cost of the technology divided by the natural logarithm of ... View the full answer