A Pacific Northwest Lumber Company Is Considering the Expansion of One

question 42

Essay

A Pacific Northwest lumber company is considering the expansion of one of its mills. The question is whether to do it now, or wait for one year and re?consider. If they expand now, the major factors of importance are the state of the economy and the level of interest rates. The combination of these two factors results in five possible situations. If they do not expand now, only the state of the economy is important, and three conditions characterize the possibilities. The following table summarizes the situation:
$\begin{array}{lll}\text { Expand }& \text { Probabilities } &\text { Revenues }\\\text { very favorable } & 0.2 & \$ 80,000 \\\text { favorable } & 0.2 & \$ 60,000 \\\text { neutral } & 0.1 & \$ 20,000 \\\text { unfavorable } & 0.3 & -\$ 20,000 \\\text { very unfavorable } & 0.2 & -\$ 30,000\\\text { Don't expand }\\\text { expansion } & 0.2 & \$ 50,000 \\\text { steady } & 0.5 & \$ 30,000 \\\text { contraction } & 0.3 & \$ 10,000\end{array}$
a. Using decision tree analysis, what is the expected value (EV) for expanding?
b. Using decision tree analysis, what is the expected value (EV) for not expanding?
c. Based on expected value (EV), what should the company's decision(s) be?

Recognize the importance of perceptual parsing in understanding complex visual stimuli.

Identify the mechanisms underlying the perception of primitive features.

Learn about reversible figures and what they demonstrate about perceptual parsing.

Understand how perception is influenced by the stimulus itself and the perceiver’s mental state.

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