Suppose a Manufacturing Plant Is Considering Three Options for Expansion

question 83

Essay

Suppose a manufacturing plant is considering three options for expansion. The first one is to expand into a new plant (large), the second to add on third-shift to the daily schedule (medium), and the third to do nothing (small). There are three possibilities for demand. These are high, medium, and low with each having an equal likelihood of occurring. Suppose that the profits for the expansion plans are as follows (respective to high, medium, low demand). The large expansion profits are $90000, $20000, -$15000, the medium expansion choice $30000, $20000, $6000 and the small expansion choice $12000, $9000, $7000. Calculate the EMV of each choice. Which of the expansion plans should the manager choose?

---

Definitions:

Eustress

Positive stress that is beneficial for a person’s health, motivating them to continue facing challenges.

Distress

Extreme anxiety, sorrow, or pain that negatively impacts an individual's mental or physical health.

Acute Stress

Short-term stress that arises in response to immediate perceived threats or challenges.

Emotional Exhaustion

A state of feeling overly stressed, drained, and worn out emotionally, often due to prolonged exposure to demanding situations or stress.