Question: You are working as a consultant on operations issues with a new customer that is contemplating expanding a growing business. Given the growth of the

You are working as a consultant on operations
You are working as a consultant on operations issues with a new customer that is contemplating expanding a growing business. Given the growth of the business, the management team is trying to decide between expanding to a bigger facility or, alternatively, a smaller facility. The smaller facility will require a further evaluation in three years given its size and capacity but costs less initially. Here are some of the assumptions the team has provided in the planning discussions. a. Estimation of demand indicates a high demand is 55% probable and low demand is 45% probable. b. Profit estimates show that the large expansion has a profitability of $250,000 under high demand and $150,000 under low demand. c. Smaller expansion has a profitability of $100,000 under low demand but requires a decision under high demand. In the event of high demand, the company has an option to expand further that would create a profit of $120,000. If the firm decides not to expand further under high demand, profit would be expected to be $70,000. Develop a decision tree and determine which approach makes the most sense for the company assuming that the cost of the larger facility is $200,000 and the smaller facility is $115,000

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