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ABC Operates a Factory in the United Kingdom \quad \quad

question 29

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ABC operates a factory in the United Kingdom.Because the company's existing factory doesn't have the capacity to meet the future demands,it is considering various options.Consider the payoff matrix that shows the payoff for each combination of decision and state of nature.Determine the best alternative using the maximax criterion. \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad  State of Nature \text { State of Nature }
 Decision Alte rnatiye  Low Demand  High Demand  Expand current facility $4 million $5 million  Build small factory $3 million $5.5 million  Build large factory $4 million $10 million \begin{array}{|c|c|c|}\hline \text { Decision Alte rnatiye } & \text { Low Demand } & \text { High Demand } \\\hline \text { Expand current facility } & \$ 4 \text { million } & \$ 5 \text { million } \\\hline \text { Build small factory } & \$ 3 \text { million } & \$ 5.5 \text { million } \\\hline \text { Build large factory } & -\$ 4 \text { million } & \$ 10 \text { million } \\\hline\end{array}

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Definitions:

U.S. GAAP

Generally Accepted Accounting Principles in the United States, a framework of accounting standards, principles, and procedures used in the compilation of financial statements.

IFRS

Stands for International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that aim to bring consistency to financial reporting around the world.

Probable

The likelihood or high chance of something happening or being the case, often used in contexts of forecasting or prediction.

Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term financial health and operational efficiency.

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