Use This Information to Answer the Following Questions -Refer to the Information Above

question 42

Essay

Use this information to answer the following questions.
ABC Inc.must make a decision on its current capacity for next year.Estimated profits (in $000s)based on next year's demand are shown in the table below.
$$\begin{array}{l}\text { Next Year's Demand }\\\begin{array} { l l l } \text { Alternative } & \text { Low } & \text { High } \\\hline \text { Expand } & \$ 100 & \$ 200 \\\text { Subcontract } & \$ 50 & \$ 120 \\\text { Do Nothing } & \$ 40 & \$ 50\end{array}\end{array}$$
-Refer to the information above.Assume that ABC Inc.has hired a marketing research firm that provided additional information regarding next year's demand.Suppose that the probabilities of low and high demand are assessed as follows: P(Low)= 0.4 and P(High)= 0.6.
a.Which alternative should be chosen using the expected monetary value (EMV)criterion?
b.What is the expected value under certainty?
c.What is the expected value under perfect information (EVPI)?

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Definitions:

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Insensitivity

A lack of sensitivity or the inability to perceive and respond to differences or changes.

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Research that seeks to document and understand group roles and interactions among members of a group.

Group Interact

The dynamic and communication patterns observed within a group of individuals when they engage or work together.