ClothTech, Inc., a textile company in North Carolina, is trying to decide whether to expand its factory, sell its factory, or keep things the same. The payoffs for these alternatives depend on whether the economic conditions are good or poor. The decision tree below illustrates the payoffs and probabilities associated with each outcome.
a). Compute the expected money value for each alternative. Which alternative is the best? (Show calculations.)
b). A consulting firm has offered to perform research and forecast the economic conditions for ClothTech. The firm will charge $200,000 for its services, and it claims that the information will be 100% accurate. Should ClothTech pay for the consulting services? Justify your response with numbers.
Problem 2: Personal Mini Warehouses is planning to expand its successful Nashua business into Lowell. In doing so, the company must determine how many storage rooms of each size to build. The problem has been formulated as a linear program (LP), as follows:
where x1 is the number of large spaces developed, and x2 is the number of small spaces developed.
a). The constraint boundaries are shown in the graph below. Different regions are labeled A through G. Which region or regions correspond to the feasible region of this problem.
b). Possible corner points for this problem are labeled [1] through [8] in the graph below. Which one is the optimal corner point? Justify you response with calculations and/or pictures.