Determine optimal decision based on expected value approach


Southland Corporation's decision to make the new line of products resulted in need to construct either the small factory or large factory. For small factory, projected profit of $15 million in event of low demand, $20 million in event of medium demand and $25 million in event of high demand. For the large factory, projected profit of $5 million in event of low demand, $20 million in event of medium demand and $50 million in event of high demand. Probability of low demand is 0.6, probability of the medium demand is 0.3 and probability of high demand is 0.2. Determine optimal decision based on expected value approach?

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Mathematics: Determine optimal decision based on expected value approach
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