A Pacific Northwest Lumber Company Is Considering the Expansion of One

question 30

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 one year and reconsider.If it expands now,the major factors are the state of the economy and the level of interest rates.The combination of these two factors results in five possible situations.If it does not expand now,only the state of the economy is important and three conditions characterize the possibilities.The following table summarizes the situation:
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a.Draw the decision tree for this problem.
b.What is the expected value for expanding?
c.What is the expected value for not expanding?
d.Based on expected value,what should the company's decision(s)be?
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Definitions:

Mechanical Advantage

The factor by which a mechanism multiplies the force put into it, enabling the lifting or moving of heavier loads with less effort.

Pitch Diameters

The effective diameter of a screw thread, halfway between the crests and roots, used in measuring and specifying thread sizes.

Diametral Pitches

Diametral pitches refer to the number of teeth per inch of the diameter of a gear, which determines the size of the teeth and the pitch of the gear.

Ratchet Wheel

A wheel or gear with teeth cut in a way that allows motion in one direction only, often used in mechanisms requiring incremental movement.