John Corner, chief engineer of Offshore Chemicals, Inc., have to decide whether to build a new processing facility based on an experimental technology. If the new facility works, the company will realize a net profit of $20 million. If the new facility fails, the company will lose $10 million. Benjamin’s best guess is that there is a 40 percent chance that the new facility will work What decision should Benjamin Moses make?
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John Corner, chief engineer of Offshore Chemicals, Inc., have to decide whether to build a new processing facility based on an experimental technology. If the new facility works, the company will realize a net profit of $20 million. If the new facility fails, the company will lose $10 million. Benjamin’s best guess is that there is a 40 percent chance that the new facility will work
What decision should Benjamin Moses make?
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- Benjamin Moses, chief engineer of Offshore Chemicals, Inc., must decide whether to build a new processing facility based on an experimental technology. If the new facility works, the company will realize a net profit of $20 million. If the new facility fails, the company will lose $10 million. Benjamin’s best guess is that there is a 40 percent chance that the new facility will work. What decision should Benjamin Moses make?See the answer A local movie studio wants to determine which of two new scripts they should select for their next major production. The manager feels that script #1 has a 70% chance of earning Php100 million over the long run, but a 30% chance of losing Php20 million. If this movie is successful, then a sequel could also be produced, with an 80% chance of earning Php50 million, but a 20% chance of losing Php10 million. On the other hand, she feels that script #2 has a 60 % chance of earning Php120 million, but a 40% chance of losing Php30 million. If successful, its sequel would have a 50% chance of earning $80 million and a 50% chance of losing Php40 million. As with the first script, if the original movie is a "flop," then no sequel would be produced. What is the expected payoff from selecting script #2?A firm must decide whether to construct a small, medium or large stamping plant. A consultant’s report indicates a 0.20 probability that demand will be low and 0.80 that demand will be high. If the firm builds a small facility and demand turns out to be low, the Net Present Value (NPV) willbe $42M. If demand turns out to be high, the firm can either subcontract and realize the NPV of $42M orexpand greatly for a Net Present Value of $48M. The firm could build a medium size facility as a hedge: if demand turns out to be low, its NPV is estimated at $22M; if demand turns out to be high, the firm could do nothing and realize a NPV of $46M, or could expand and realize a NPV of $50M. If the firm builds a large facility and demand is low, the NPV will be ($20M), whereas high demand will result in a NPV of $72M. Compute the EVPI *
- A new minor league baseball team is coming to town and the owners have decided to build a new stadium, either small or large. The success of the team with regard to ticket sales will be either high or low with probabilities of 0.75 and 0.25, respectively. If demand for tickets is high, the large stadium would provide a payoff of approximately $20 million. If ticket sales are low, the loss on the large stadium would be $5 million. If a small stadium is constructed, and ticket sales are low, the payoff is $500,000 after deducting the cost of construction. If ticket sales are high, the team can choose to build an upper deck, or to maintain the existing facility. Expanding the stadium in this scenario has a payoff of $10 million, whereas maintaining the same number of seats has a payoff of only $3 million. a. Draw a decision tree for this problem. b. What should management do to achieve the highest expected payoff?Herndon Development Group (HDG) is planning for a new investment. They would like to make a sequence of decisions that start with determining whether to purchase an apartment building or land. Cost of purchasing an apartment is $800,000 and purchasing land is $200,000. If HDG purchases the apartment building, two states of nature are possible: The town may exhibit population growth, with a probability of 0.60, or there may be no population growth or a decline, with a probability of .40. If the population grows, the investor will achieve a revenue of $2,000,000. However, if there is no population growth, the revenue is $250,000. If the decision is to purchase land, the investor will wait for 3 years and consider developing the land based on the population growth. The probability of a growing population is .60, whereas the probability of a stable or declining population is 0.40. If population growth occurs for a 3-year period, the investor will make another decision regarding land…A manager is trying to decide whether to build a small,medium, or large facility. Demand can be low, average,or high, with the estimated probabilities being 0.25, 0.40,and 0.35, respectively.A small facility is expected to earn an after-tax net pres-ent value of just $18,000 if demand is low. If demand isaverage, the small facility is expected to earn $75,000; it canbe increased to medium size to earn a net present value of$60,000. If demand is high, the small facility is expected to earn $75,000 and can be expanded to medium size to earn$60,000 or to large size to earn $125,000.A medium-sized facility is expected to lose an estimated$25,000 if demand is low and earn $140,000 if demand isaverage. If demand is high, the medium-sized facility isexpected to earn a net present value of $150,000; it can beexpanded to a large size for a net payoff of $145,000.If a large facility is built and demand is high, earningsare expected to be $220,000. If demand is average for thelarge facility, the…
- A manager is trying to decide whether to build a small, medium or large facility. Demand can be low, average, or hit, with the estimated probabilities being 0.25, 0.40, and 0.35 respectively A small facility is expected to earn an after-tax net present value of just $18,000 if demand is low. If demand is average, the small facility is expected to earn $75,000; it can be increased to medium size to earn a net present value of $60,000. If demand is high, the small facility is expected to earn $75,000 and can be expanded to medium size to earn $60,000 or to large to earn $125,000. A medium-size facility is expected to lose an estimated $25,000 if demand is low and earn $140,000 if demand is average. If demand is high, the medium-size facility is expected to earn a net present value of $150,000; it can be expanded to a large size for a net payoff of $145,000. If a large facility is built and demand is high, earnings are expected to be $220,000. If demand is average for the large facility,…A manager is trying to decide whether to build a small, medium or large facility. Demand can be low, average, or hit, with the estimated probabilities being 0.25, 0.40, and 0.35 respectively A small facility is expected to earn an after-tax net present value of just $18,000 if demand is low. If demand is average, the small facility is expected to earn $75,000; it can be increased to medium size to earn a net present value of $60,000. If demand is high, the small facility is expected to earn $75,000 and can be expanded to medium size to earn $60,000 or large to earn $125,000. A medium-size facility is expected to lose an estimated $25,000 if demand is low and earn $140,000 if demand is average. If demand is high, the medium-size facility is expected to earn a net present value of $150,000; it can be expanded to a large size for a net payoff of $145,000. If a large facility is built and demand is high, earnings are expected to be $220,000. If demand is average for the large facility,…A firm must decide whether to construct a small, medium, or large stamping plant. A consultant’sreport indicates a .20 probability that demand will be low and an .80 probability that demand willbe high.If the firm builds a small facility and demand turns out to be low, the net present value will be$42 million. If demand turns out to be high, the firm can either subcontract and realize the net present value of $42 million or expand greatly for a net present value of $48 million.The firm could build a medium-size facility as a hedge: If demand turns out to be low, its netpresent value is estimated at $22 million; if demand turns out to be high, the firm could do nothingand realize a net present value of $46 million, or it could expand and realize a net present value of$50 million.If the firm builds a large facility and demand is low, the net present value will be – $20 million,whereas high demand will result in a net present value of $72 million.a. Analyze this problem using a decision…
- Jeffrey Mogul is a Hollywood film producer, and he is currently evaluating a script by a new screenwriter and director, Betty Jo Thurston. Jeffrey knows that the probability of a film by a new director being a success is about .10 and that the probability it will flop is .90. The studio accounting department estimates that if this film is a hit, it will make $25 million in profit, whereas if it is a box office failure, it will lose $8 million. Jeffrey would like to hire noted film critic Dick Roper to read the script and assess its chances of success. Roper is generally able to correctly predict a successful film 70% of the time and correctly predict an unsuccessful film 80% of the time. Roper wants a fee of $1 million. Determine whether Roper should be hired, the strategy Mogul should follow if Roper is hired, and the expected value.Today’s Electronics specializes in manufacturing modern electronic components. It also builds the equipment that produces the components. Phyllis Weinberger, who is responsible for advising the president of Today’s Electronics on electronic manufacturing equipment, has developed the following table concerning a proposed facility: Payoffs Outcomes Large facility 550,000 -310,000 Medium-sized facility 300,000 -100,000 Small facility 200,000 -32,000 No facility 0 0 Develop an opportunity loss table. What is the minimax regret decision? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low, average, or high, with the estimated probabilities being 0.40, 0.35, and 0.25, respectively. A small facility is expected to earn an after-tax net present value of just $13,000 if demand is low. If demand is average, the small facility is expected to earn $15,000; it can be increased to medium size to earn a net present value of $30,000. If demand is high, the small facility is expected to earn $25,000 and can be expanded to medium size to earn $50,000 or to large size to earn $100,000. A medium-sized facility is expected to lose an estimated $50,000 if demand is low and earn $100,000 if demand is average. If demand is high, the medium-sized facility is expected to earn a net present value of $125,000; it can be expanded to a large size for a net payoff of $175,000. If a large facility is built and demand is high, earnings are expected to be $180,000. If demand is average for the large…