Dianna Ivy Is Evaluating a Plan to Expand the Production

question 72

Multiple Choice

Dianna Ivy is evaluating a plan to expand the production facilities of International Compressors Company which manufactures natural gas compressors.Dianna feels that the price of coal is a significant factor in her decision.Below are her estimates of payoffs from various expansion plans under different prices of coal.If Diana knows the price of coal in the future will be higher, what expansion plan should she select? $$\begin{array} { | l | c | c | c | } \hline \text { PAYOFFE (\$riil) } & \text { Lower } & \text { \$arre } & \text { Higher } \\\hline \text { Larpe exparisior } & - \$ 500 & - \$ 100 & \$ 1,000 \\\hline \text { Medimer exparision } & - \$ 300 & \$ 150 & \$ 800 \\\hline \text { Brrall exparisior } & - \$ 50 & \$ 100 & \$ 400 \\\hline \text { No exparisior } & \$ 0 & \$ 75 & \$ 300 \\\hline\end{array}$$

• A)No expansion
• B)Small expansion
• C)Medium expansion
• D)Cannot determine from information
• E)Large expansion

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Definitions:

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