An operations manager's staff has compiled the information below for four manufacturing alternatives (E,F,G,and H)that vary by production technology and the capacity of the machinery.All choices enable the same level of total production and have the same lifetime.The four states of nature represent four levels of consumer acceptance of the firm's products.Values in the table are net present value of future profits in millions of dollars.Forecasts indicate that there is a 0.1 probability of acceptance level 1,0.2 chance of acceptance level 2,0.4 chance of acceptance level 3,and 0.3 change of acceptance level 4.
Using the criterion of expected monetary value,which production alternative should be chosen?
Definitions:
Dollars
The official currency of the United States, also widely used as a benchmark and reserve currency globally.
Risk-free Rates
The expected profit from an investment that carries no risk of losing money, often linked to government securities.
Spot Exchange Rate
The current rate for instant purchase or sale of a currency in the exchange market.
Futures Price
The agreed-upon price for a futures contract, which is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future.
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