Edwards 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	$80,000		$90,000		$170,000
Advanced model	$50,000		$100,000		$215,000

Fill in the table below for maximum and minimum profit payoffs under each model. Round your answers to the nearest dollar.

Decision alternative	Maximum	Minimum
Basic model	$	$
Advanced model	$	$

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	$	$	$	$

Given the uncertainty associated with the demand volume, and no other information to work with, what decision would you make?

j B D E F G H 1 Decision Analysis Cengage Learning 2 Enter the data only in the yellow cells. Not for commercial use. 3 This template is designed to allow up to 5 decision alternatives and future events. 4 Enter names of decision alternatives and future events in the appropriate cells in column A or k and row 7. Probabilities are optional. 5 6 Payoff Table Future Events 7 Decision Alternative Low Product Demand High Product Demand Maximum Minimum Expected Value 8 Expand existing plant $200,000.00 $300,000.00 $300,000.00 $200,000.00 9 Build new plant $100,000.00 $450,000.00 $450,000.00 $100,000.00 10 Maximum Expected Value $0.00 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 11 12 13 Probability 14 15 Opportunity Loss Matrix 16 Decision Alternative 17 Expand existing plant 18 Build new plant 19 20 21 22 23 Maximax Decision 24 Maximin Decision 25 Opportunity Loss Decision 26 Expected Value Decision 27 EVPI 28 29 30 31 32 Build new plant Expand existing plant Build new plant /A #N/A