XYZ Is a Paint Product Manufacturer,and One of the Plants $\quad$

question 17

Multiple Choice

XYZ is a paint product manufacturer,and one of the plants is experiencing a substantial increase in demand.The future demand for the products could be low,medium,or high,with probabilities estimated to be 25%,50%,and 30%,respectively.The company wants to determine the financial impact associated with the three decision alternatives under the varying levels of demand.Given the following payoff matrix,determine which option has the lowest expected regret.The company should ______. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Demand }$

$\begin{array} { | c | c | c | c | } \hline \text { Decision Aternative } & \text { Low } ( 20 \% ) & \text { Medium } ( 50 \% ) & \text { High (30\%) } \\\hline \begin{array} { c } \text { Subcontract additional } \\\text { capacity }\end{array} & \$ 7 \text { million } & \$ 40 \text { million } & \$ 70 \text { m illion } \\\hline \text { Build a new plant } & - \$ 55 \text { million } & \$ 25 \text { million } & \$ 100 \text { million } \\\hline \text { Do nothing } & \$ 15 \text { million } & \$ 30 \mathrm {~m} \text { illion } & \$ 85 \text { million } \\\hline\end{array}$

• A)subcontract additional facility.
• B)build a new plant.
• C)do nothing.
• D)choose a new alternative

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Definitions:

Interest Method

A method used in finance to calculate the interest portion of a payment or the return on an investment over a period of time.

Semiannual Interest

Interest that is both computed and disbursed semi-annually on an investment or loan.

Bond Discount

The financial disparity that occurs when a bond is sold for an amount below its stated face value, comparing its selling price to its face value.

Interest Method

A financial calculation used to determine the amount of interest due or earned over a specific period of time, considering factors like principal, rate, and time.