IvanRivera6.Unit9-MM305_Final_Project_Problems

# IvanRivera6.Unit9-MM305_Final_Project_Problems - Ivan...

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Ivan Rivera 6 MM305 Final Project Problems 1.  Modern Electronics specializes in manufacturing modern electronic components.  It also  builds the equipment that produces the components.  Modern Electronics is considering building  a new facility but the estimated profits would be impacted by the type of market that develops.  The probability for a strong market is 0.3; for a fair market is 0.5; and for a poor market is 0.2.  You are responsible for advising the president of Modern Electronics on the type facility that  should be built or to not build a facility at all.  The table shows the estimated profits under each  market and for each size facility. Estimated Profits Strong Market  Fair Market Poor Market Build a large facility 550,000 110,000 -310,000 Build a medium-size  facility 300,000 129,000 -100,000 Build a small facility 200,000 100,000 -32,000 Do not build a facility 0 0 0 Using the information in the table above develop a recommendation for your president.  Be sure  to explain why you are making the recommendation and you must include a recommendation  that maximizes profits and a recommendation that minimizes loss. Answer: ) Deciding on what type of company should be developed we must think of the models within the different market ranges that deal with profits and losses and pick the one that has the highest profit in most of the probability. 1. To build a large facility: Net gain or net loss = 0.3*550,000+0.5*110,000-0.2*310,000 =158,000 2. Build a Medium size facility: Net gain or loss =0.3*300,000+0.5*129,000-0.2*100,000 = 134,500 3. Build a small size facility: Net gain or Loss=0.3*200,000+0.5*100,000-0.2*32,000 = 103,600

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From the calculation up on top we can see clearly that the more you risk the more you could win or lose so the Larger Facility is best choice because in a strong market you can make enough to cover the losses on a poor market. 2. Consulting income at Kaplan Associates for the period February – July has been as follows:
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## This note was uploaded on 07/06/2011 for the course MT 480 taught by Professor Weaver during the Spring '11 term at Kaplan University.

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IvanRivera6.Unit9-MM305_Final_Project_Problems - Ivan...

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