ModAhw-b

# ModAhw-b - (b EVPI = \$364,000 − 320,000 = \$44,000 7(a...

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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...

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