A Chemical Company Is Trying to Decide Whether to Build

question 22

Essay

A chemical company is trying to decide whether to build a pilot plant now for a new chemical process or to build the full plant now.If it builds a pilot plant now,it could expand later to a full plant or license the plant to another company.It would cost $2 million to build the pilot plant and another $2 million later to expand it.If the company builds the full plant now,it would cost $3.5 million to construct.​
The returns the company expects to get from the full production plant depend on the market.There is a 60% chance the market will be robust,a 30% chance it will remain stable,and a 10% chance it will become stagnate.The returns are estimated to be $5 million if it is robust,$3 million if it is stable,and $1 million if it is stagnate.​
Before the company expands the pilot plant,it plans to conduct a comprehensive study.Based on past experience,it expects the study to report a 60% chance of favorable outcome for expansion and a 40% unfavorable chance.In either case,it will have to decide whether to expand to a full plant or license the pilot plant.If the report is favorable and the company licenses it,the company expects to get $3 million.However,if the report is unfavorable and the company licenses it,the company will only get $1 million.​
Develop a decision tree for this problem and determine the optimal decision strategy.

Identify and explain the process of natural selection and its relevance to human behavior.

Understanding the basic principles of Freud's psychoanalytic theory and Rogers's humanistic theory.

Recognizing the role of self-concepts and self-perceptions in human behavior and personality.

Identifying the mechanisms of self-verification and its impact on interpersonal relationships.

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Definitions:

Net Investment

The total investment in new capital minus depreciation on existing capital, measuring the growth in the stock of productive assets in an economy.

Gross Investment

Total expenditure on new fixed assets and inventories within a specific period, without deducting depreciation.

Business Population

The total number of businesses within a specific area or category at a given time.

Sole Proprietorships

Business entities owned and operated by one person, where there is no legal distinction between the owner and the business.