ModAhw-b - (b) EVPI = $364,000 320,000 = $44,000 7 (a) EMV...

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SP10 BUS3-140 M ODULE A H OMEWORK The first station should be very large, with an EMV = $55,000 (b) Maximax decision: very large station (c) Maximin decision: small station (d) Equally likely decision: very large station (e) A.1 A.2
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A.5 a) EMV (assembly line) = (0.4)($10,000) + (0.6)($40,000) = $28,000 EMV (plant) = (0.4)( $100,000) + (0.6)($600,000) = $320,000 EMV (nothing) = 0 Select the new plant option.
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Unformatted text preview: (b) EVPI = $364,000 320,000 = $44,000 7 (a) EMV (Alt. 1) = (0.4)(10,000) + (0.6)(30,000) = $22,000 EMV (Alt. 2) = (0.4)(5,000) + (0.6)(40,000) = $26,000 EMV (Alt. 3) = (0.4)( 2,000) + (0.6)(50,000) = $29,200 So the Max EMV is Alternative 3. (b) Expected value with perfect information = (0.4)(10,000) + (0.6)(50,000) = $34,000 (c) EVPI = $34,000 $29,200 = $4,800....
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ModAhw-b - (b) EVPI = $364,000 320,000 = $44,000 7 (a) EMV...

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