How do you do question 2?

1. (2000 Strategie Capacity Analysis Decision Tree Use for Production Capacity Determination at Toyota Motor Manufacturing of Canada (TMMC) This exercise illustrates how determination of an optimal production capacity option can be made from among several possible options based on the probability of their occurrence and the provided payoffs of events that influence these options If you are not familiar with the decision tree analysis, you are strongly encouraged to study the voice recorded PPT and read the text book. The concept of the expected value is so important to solve problem. It is FYO, and TMMC has decided to produce the new Lexus RX 330 line, with the first unit deliverable in FY3. Toyota must now determine the amount of annual production capacity it should build. Toyota's goal is to maximize the profit from this line over the five years from FY3- FY7. These vehicles will sell for an average of $37.000 and incur a unit production cost of $28,000. 10,000 units of annual production capacity can be built for $50M (M=million) with additional blocks of 5,000 units of annual capacity each costing $15M. Each block of 5,000 units of capacity will also cost $5M per year to maintain, even if the capacity is unused. Marketing has provided three vehicle demand scenarios with associated probabilities as follows: 10.7+ ick ve 1 x ,283 Demand Low Moderate High FY3 10.000 15,000 20,000 FY4 10.500 16,000 24,000 FYS 11,000 17,000 26,000 FY5 11,500 18.000 28,000 FY7 12.000 19.000 30.000 Probability 0.25 0.50 10k 0.25 Assume that the number of units actually sold each year will be the lesser of the For all other years, the fine, value is obtained since the lesser af leik demand and the production capacity. Annual capacity and demand tole alue 1. Should TMMC in FYO decide to build a facility with a production capacity of 10,000 15,000, 20,000, 25,000, or 30,000 cars? Mathematically justify your answer based on the information provided. ETP(241) = 0.25 krok 5x+ 2 xen 2. What are the flaws or limitations in this analysis? Provide at least three. This is BETNA to evaluate your level of understanding on the method in terms of the 3som theoretical background, assumptions and managerial insights. Do not say that the forecasting is not accurate or the data is not accurate or sufficient etc. (any forecasting is not accuratel). For example, no consideration of time value of goms your yre 1