Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers believe that there is a probability of .35 that the ATR Co. will come out with a competitive product. If Weiss adds an assembly line for the product and ATR Co. does not follow with a competitive product, Weiss's expected profit is $40,000 ; if Weiss adds an assembly line and ATR follows suit, Weiss still expects $20,000 profit. If Weiss adds a new plant addition and ATR does not produce a competitive product, Weiss expects a profit of $600,000 ; if ATR does compete for this market, Weiss expects a loss of $120,000. Part 2 a) Expected value for the option = $ b)Expected value for the build new plant option = c) The alternative that provides Weiss the greatest expected monetary return (EMV) is= d) The expected value of perfect information (EVP) for Weiss =
Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers believe that there is a
probability of .35 that the ATR Co. will come out with a competitive product. If Weiss adds an assembly line for the product and ATR Co. does not follow with a competitive product, Weiss's expected profit is $40,000 ; if Weiss adds an assembly line and ATR follows suit, Weiss still expects $20,000 profit. If Weiss adds a new plant addition and ATR does not produce a competitive product, Weiss expects a profit of $600,000 ; if ATR does compete for this market, Weiss expects a loss of $120,000.
Part 2
a) Expected value for the option = $ b)Expected value for the build new plant option = c) The alternative that provides Weiss the greatest expected monetary return (EMV) is= d) The expected value of perfect information (EVP) for Weiss =
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