A Plant Manager Considers the Operational Cost Per Hour of Five

question 75

Multiple Choice

A plant manager considers the operational cost per hour of five machine alternatives.The cost per hour is sensitive to three potential weather conditions: cold, mild, and warm.The following table represents the operations cost per hour for each alternative-state of nature combination: Assume that for a randomly selected day, there is a 30% probability of cold weather, 50% probability of mild weather, and 20% probability of warm weather.What is the EVPI?

• A)$5.8
• B)$6.6
• C)$1.6
• D)$3.2

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Definitions:

Consolidated Additional Paid-in Capital

The excess amount investors pay over the par value of shares, aggregated from all subsidiaries of a parent company and reported on the consolidated financial statements.

Additional Paid-in Capital

The amount of money investors have paid for shares above their nominal value during the issuance of stock.

Voting Shares

Shares of a company that grant the shareholder the right to vote on company matters, such as electing the board of directors.

Fair Value

A projected cost at which property or obligation can be swapped among aware, agreeable individuals in a transaction without any undue pressure.