Kipling Equipment Inc. must decide to produce either a face mask or a face shield to X alleviate the spread of a quickly evolving coronavirus. The face mask is disposable and developing it could potentially lead to a profit of $300,000 if competition is high or a profit of $470,000 if competition is low. The face shield, on the other hand, is reusable and has the potential of generating a fixed profit of $430,000 irrespective of high or low competition. The probability of high competition is 52% while that of low competition is 48%. Co Part A Construct a decision tree or a payoff table for the decision problem and use it to answer the following questions. a) What is the expected monetary value of the optimal decision? $ b) Based on expected monetary value, what should the Kipling do? $ Produce face shield c) What is the upper bound on the amount Kipling should pay for additional information? $

Kipling Equipment Inc. must decide to produce either a face mask or a face shield to X alleviate the spread of a quickly evolving coronavirus. The face mask is disposable and developing it could potentially lead to a profit of $300,000 if competition is high or a profit of $470,000 if competition is low. The face shield, on the other hand, is reusable and has the potential of generating a fixed profit of $430,000 irrespective of high or low competition. The probability of high competition is 52% while that of low competition is 48%. Co Part A Construct a decision tree or a payoff table for the decision problem and use it to answer the following questions. a) What is the expected monetary value of the optimal decision? $ b) Based on expected monetary value, what should the Kipling do? $ Produce face shield c) What is the upper bound on the amount Kipling should pay for additional information? $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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