Suppose a Manufacturing Plant Is Considering Three Options for Expansion

question 54

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 $100000, $10000, -$10000, the medium expansion choice $40000, $40000, $5000 and the small expansion choice $15000, $15000, $15000. Calculate the EMV of each choice. Which of the expansion plans should the manager choose?

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Definitions:

Anorexia

An eating disorder characterized by an abnormally low body weight, an intense fear of gaining weight, and a distorted perception of body weight or shape.

Bulimia

An eating disorder marked by binge eating followed by methods to avoid weight gain, such as vomiting or excessive exercise.

Binge Eating Disorder

An eating disorder marked by recurrent episodes of eating large quantities of food in a short period of time, accompanied by feelings of loss of control and often shame or guilt afterward.

Bulimia

A disorder related to eating that involves cycles of overeating and then engaging in improper compensatory actions like vomiting to counteract the binge eating.