2 b due to the uncertainty in expected sales for

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Unformatted text preview: ld be (100,000 units)($30,000 – $24,000) = $600 million – $200 million (fixed cost) = $400 million. If the Indiana plant is used and sales are moderate, the profit would be (50,000 units)($30,000 – $16,000) = $700 million – $200 million (fixed cost) = $500 million. If the Georgia plant is used and sales are strong, the profit would be (100,000 units)($30,000 – $20,000) = $1000 million – $400 million (fixed cost) = $600 million. If the Georgia plant is used and sales are moderate, the profit would be (50,000 units)($30,000 – $22,000) = $400 million – $400 million (fixed cost) = $0. The resulting solved decision tree is shown below. The decision to share the plant in Indiana has a higher expected profit of $440 million. 2 b. Due to the uncertainty in expected sales for the V...
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