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MacDonald Products, Inc., of Clarkson, New York, has the option of (a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or (b) having the value analysis team complete a study. If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 100,000 units at $610 each, with a probability of 0.78 and a 0.22 probability of 65,000 at $610. If, however, he uses the value analysis team (option b), the firm expects sales of 80,000 units at $740, with a probability of 0.74 and a 0.26 probability of 65,000 units at $740. Value engineering, at a cost of $115,000, is only used in option b. Which option has the highest expected monetary value (EMV)? The EMV for option a is $and the EMV for option b is $ Therefore, option V has the highest expected monetary value. (Enter your responses as integers.)

MacDonald Products, Inc., of Clarkson, New York, has the option of (a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or (b) having the value analysis team complete a study. If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 100,000 units at $610 each, with a probability of 0.78 and a 0.22 probability of 65,000 at $610. If, however, he uses the value analysis team (option b), the firm expects sales of 80,000 units at $740, with a probability of 0.74 and a 0.26 probability of 65,000 units at $740. Value engineering, at a cost of $115,000, is only used in option b. Which option has the highest expected monetary value (EMV)? The EMV for option a is $and the EMV for option b is $ Therefore, option V has the highest expected monetary value. (Enter your responses as integers.)

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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MacDonald Products, Inc., of Clarkson, New York, has the option of (a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or (b) having the value analysis team complete a study. If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 100,000 units at $610 each, with a probability of 0.78 and a 0.22 probability of 65,000 at $610. If, however, he uses the value analysis team (option b), the firm expects sales of 80,000 units at $740, with a probability of 0.74 and a 0.26 probability of 65,000 units at $740. Value engineering, at a cost of $115,000, is only used in option b. Which option has the highest expected monetary value (EMV)? The EMV for option a is $ and the EMV for option b is $ Therefore, option has the highest expected monetary value. (Enter your responses as integers.)
Transcribed Image Text:MacDonald Products, Inc., of Clarkson, New York, has the option of (a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or (b) having the value analysis team complete a study. If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 100,000 units at $610 each, with a probability of 0.78 and a 0.22 probability of 65,000 at $610. If, however, he uses the value analysis team (option b), the firm expects sales of 80,000 units at $740, with a probability of 0.74 and a 0.26 probability of 65,000 units at $740. Value engineering, at a cost of $115,000, is only used in option b. Which option has the highest expected monetary value (EMV)? The EMV for option a is $ and the EMV for option b is $ Therefore, option has the highest expected monetary value. (Enter your responses as integers.)
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