A Company Is Considering Expansion of Its Current Facility to Meet

question 64

Essay

A company is considering expansion of its current facility to meet increasing demand.A major expansion would cost $500,000, while a minor expansion would cost $200,000.If demand is high in the future, the major expansion would result in an additional profit of $800,000, but if demand is low, then there would be a loss of $500,000.If demand is high, the minor expansion will result in an increase in profits of $200,000, but if demand is low, then there is a loss of $100,000.The company has the option of not expanding.For what probability of a high demand will the company be indifferent between the two expansion alternatives?

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Definitions:

Secondary Voltage

The output voltage of a transformer or another type of electrical machine, which is induced by the primary voltage.

Primary

In electrical systems, the initial or main input side of a transformer or circuit.

Center Tapped

A feature in transformers or electrical wires that allows for the creation of a neutral point by tapping into the middle of the windings or conductor.

Neutral Conductor

The grounded conductor of a power system. It is connected to ground potential and is considered a current-carrying conductor. The neutral is generally white or gray in color.