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Dwayne Whitten, president of Whitten Industries, is considering whether to build a manufacturing plant in north Texas. His decision is summarized in the following table: 5. ALTERNATIVES FAVORABLE MARKET UNFAVORABLE MARKET Build large plant $400,000 -5300,000 Build small plant S 80,000 -s 10,000 Don't build Market probabilities 0.4 0.6 a) Construct a decision tree. b) Determine the best strategy using expected monetary value (EMV). c) What is the expected value of perfect information (EVPI)?

Dwayne Whitten, president of Whitten Industries, is considering whether to build a manufacturing plant in north Texas. His decision is summarized in the following table: 5. ALTERNATIVES FAVORABLE MARKET UNFAVORABLE MARKET Build large plant $400,000 -5300,000 Build small plant S 80,000 -s 10,000 Don't build Market probabilities 0.4 0.6 a) Construct a decision tree. b) Determine the best strategy using expected monetary value (EMV). c) What is the expected value of perfect information (EVPI)?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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5. Dwayne Whitten, president of Whitten Industries, is considering whether to build a manufacturing plant in north Texas. His decision is summarized in the following table: ALTERNATIVES FAVORABLE MARKET UNFAVORABLE MARKET Build large plant $400,000 -$300,000 Build small plant $ 80,000 -s 10,000 Don't build Market probabilities 0.4 0.6 a) Construct a decision tree. b) Determine the best strategy using expected monetary value (EMV). c) What is the expected value of perfect information (EVPI)?
Transcribed Image Text:5. Dwayne Whitten, president of Whitten Industries, is considering whether to build a manufacturing plant in north Texas. His decision is summarized in the following table: ALTERNATIVES FAVORABLE MARKET UNFAVORABLE MARKET Build large plant $400,000 -$300,000 Build small plant $ 80,000 -s 10,000 Don't build Market probabilities 0.4 0.6 a) Construct a decision tree. b) Determine the best strategy using expected monetary value (EMV). c) What is the expected value of perfect information (EVPI)?
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