A factory is trying to decide how much pollution they should allow to be released by their plant. They have two options: they can either implement new filtering system s to decrease pollution, or they can boost production without any filtering, significantly increasing pollution. It will cost them $3 million to implement the new filtering system. A careful market analysis reveals that there is a 70% chance that the industry will fall under a new "green" initiative. If this happens, and they have implemented new filtering systems, they can expect their profit to increase by $5 million. if they implement the new filtering system and the green initiative doesn't take off, then their profits will likely stay the same, though they will have still have paid for the filters. Alternatively, if they increase production without changing the factor at all, then they figure they will be able to increase their profits by $8 million without changing the cost of production. however, if the green inititative takes off, they will be subject to increase EPA inspections, and they will be fined $15 million. a. Construct a decision table to model this decision b. Construct a decision tree to model this decision c. what should the factory do?
A factory is trying to decide how much pollution they should allow to be released by their plant. They have two options: they can either implement new filtering system s to decrease pollution, or they can boost production without any filtering, significantly increasing pollution. It will cost them $3 million to implement the new filtering system. A careful market analysis reveals that there is a 70% chance that the industry will fall under a new "green" initiative. If this happens, and they have implemented new filtering systems, they can expect their profit to increase by $5 million. if they implement the new filtering system and the green initiative doesn't take off, then their profits will likely stay the same, though they will have still have paid for the filters. Alternatively, if they increase production without changing the factor at all, then they figure they will be able to increase their profits by $8 million without changing the cost of production. however, if the green inititative takes off, they will be subject to increase EPA inspections, and they will be fined $15 million. a. Construct a decision table to model this decision b. Construct a decision tree to model this decision c. what should the factory do?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Transcribed Image Text:A factory is trying to decide how much pollution
they should allow to be released by their plant.
They have two options: they can either
implement new filtering system s to decrease
pollution, or they can boost production without
any filtering, significantly increasing pollution. It
will cost them $3 million to implement the new
filtering system. A careful market analysis reveals
that there is a 70% chance that the industry will
fall under a new "green" initiative. If this
happens, and they have implemented new
filtering systems, they can expect their profit to
increase by $5 million. if they implement the
new filtering system and the green initiative
doesn't take off, then their profits will likely stay
the same, though they will have still have paid
for the filters. Alternatively, if they increase
production without changing the factor at all,
then they figure they will be able to increase
their profits by $8 million without changing the
cost of production. however, if the green
inititative takes off, they will be subject to
increase EPA inspections, and they will be fined
$15 million.
a. Construct a decision table to model this
decision
b. Construct a decision tree to model this
decision
c. what should the factory do?
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