MG375 Week 2 Homework

MG375 Week 2 Homework - Example 4.2 - Decision trees Value...

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Example 4.2 - Decision trees Value Revenue Build Cost Strong Growth $765,000 $975,000 $210,000 0.55 Move $585,000 Weak Growth $365,000 $575,000 $210,000 0.45 Strong Growth $863,000 $950,000 $87,000 0.55 $703,750 Expand $660,500 Weak Growth $413,000 $500,000 $87,000 0.45 Expand $843,000 $930,000 $87,000 Strong Growth $850,000 0.55 Do Nothing $703,750 Do Nothing $850,000 $850,000 $0 Weak Growth $525,000 $525,000 $0 0.45 Chapter 4, Problem 5 Value Revenue Building Cost High demand $4,800,000 $12,000,000 $6,000,000 0.4 Small Facility $4,800,000 Low demand $6,000,000 $10,000,000 $6,000,000 0.6 High demand $5,600,000 $14,000,000 $9,000,000 0.4 $4,800,000 Large Facility $2,600,000 Low demand $6,000,000 $10,000,000 $9,000,000 0.6 High demand $0 $0 $0 0 Do Nothing $0 Low demand $0 $0 $0 0 Hacker's Computer Store Expando Additional Factory
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Exhibit 4.4 - Decision Tree Analysis EV= $585,000.00 $765,000.00 Strong Growth 0.55 $365,000.00 Weak Growth Move 0.45 EV= $660,500.00 $863,000.00 Strong Growth Expand
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MG375 Week 2 Homework - Example 4.2 - Decision trees Value...

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