Ch. 9 # 8 OM330

Ch. 9 # 8 OM330 - The company should choose the large...

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Ch.9 Estimated Problem 8 Probability Profitbability 0.70 high demand $80,000 large expansion 0.30 low demand $50,000 expand further 0.70 high demand small expansion don’t expand and fail to 0.30 low demand $40,000 EV large= .70(80,000)+.30(50000) $71,000 EV small= .70(50,000)+.30(40,000) $47,000
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Unformatted text preview: The company should choose the large expansion because it will make them most money and gives a higher expected value regardless of probability. Also a large expansion avoids any forseeable future need for expansion. 1 2 $50,000 to meet demand...
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Ch. 9 # 8 OM330 - The company should choose the large...

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