You are project manager for a construction project, and have the option of building a mock-up before undertaking full-scale construction. The mock-up is extensive and will cost $200,000 to build. If you build the mock-up, the probability that the full-scale build at the site will not be as you intended is estimated to be 0.1. If this happens, there is an estimated extra cost impact of $100,000 for re-work. If you dont build the mock-up, the probability that the full-scale build at the site will not be as you intended is estimated to be 0.4. In addition, without the mock-up, you will pursue an alternative construction method that, if re-work is needed, will have an estimated extra cost impact of $450,000. For both cases, with and without the mock-up, if the constructed result is adequate and no re-work is needed, there is no cost impact.

a) Should you spend the extra $200,000 to build the mock-up? (You can assume there is no schedule impact of building the mock-up to take into account when making the decision.)

b) If the cost of building the mock-up is reduced to $150,000, does your decision change as to whether you should build the mock-up or not?

Problem 1 You are project manager for a construction project, and have the option of building a mock-up before undertaking full-scale construction. The mock-up is extensive and will cost $200,000 to build. If you build the mock-up, the probability that the full-scale build at the site will not be as you intended is estimated to be 0.1. If this happens, there is an estimated extra cost impact of $100,000 for re-work. If you don't build the mock-up, the probability that the full-scale build at the site will not be as you intended is estimated to be 0.4. In addition, without the mock-up, you will pursue an alternative construction method that, if re-work is needed, will have an estimated extra cost impact of S450,000. For both cases, with and without the mock-up, if the constructed result is adequate and no re-work is needed, there is no cost impact. Should you spend the extra $200,000 to build the mock-up? (You can assume there is no schedule impact of building the mock-up to take into account when making the decision.) a) b) If the cost of building the mock-up is reduced to $150,000, does your decision change as to whether you should build the mock-up or not