A Firm Must Choose Between Remaining Where It Is, with Current

question 53

Essay

A firm must choose between remaining where it is, with current capacity, and building a new facility with 50% more capacity. The probability of high demand is estimated to be 75%. The current facility would provide $100,000 profit if there is high demand or $50,000 profit if there is low demand. The replacement facility would provide $160,000,000 profit if there is high demand but would only break even if there is low demand. What is the expected value of each option?

Appreciate the complexity of ecosystems within biomes, including nutrient cycles and energy flows.

Explain the physiological and behavioral adaptations of organisms to their specific biomes.

Understand the concept of ecological succession and its role in biome dynamics.

Understand the basic principles and mechanisms of climate and weather, including the distinction between them.

---

Definitions:

Investment Center

A business unit or division that is responsible for its own revenues, expenses, assets, and returns, and is evaluated on its profitability and efficiency in using its assets.

Profit Center

A department or unit within an organization that is responsible for generating revenue and is evaluated based on its profitability.

Service Department

A segment within a business that supports other departments by providing internal services or activities.

Fixed Costs

Expenses that do not vary in total despite fluctuations in the amount of work or volume of production.