Problem:
Juice Company is producing a new product line. The annual demand has the following probability distribution:
Annual Demand Probability
20,000 0.3
50,000 0.5
90,000 0.2
Each case of Juice sells for $5 and incurs a $3 Variable cost. it costs the company $800000 to build factory to produce this new Juice. Assume that $1 received every year forever is equivalent to receiving $10 now. Needs to read in Net present Value. Company needs to know whether to build the factory based on a pay off table and the following results:
a) Maximin and Maximax results
b) Minimax regret
c) Expected Value
d) Hurwicz (use 0.6)
d) Calculate Perfect Information