← 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 95,000 units at $510 each, with a probability of 0.31 and a 0.69 probability of 80,000 at $510. If, however, he uses the value analysis team (option b), the firm expects sales of 75,000 units at $720, with a probability of 0.75 and a 0.25 probability of 60,000 units at $720. Value engineering, at a cost of $100,000, 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 a 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 95,000 units at $510 each, with a probability of 0.31 and a 0.69 probability of 80,000 at $510. If, however, he uses the value analysis team (option b), the firm expects sales of 75,000 units at $720, with a probability of 0.75 and a 0.25 probability of 60,000 units at $720. Value engineering, at a cost of $100,000, 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 a has the highest expected monetary value. (Enter your responses as integers.)
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 95,000 units at $510 each, with a probability of 0.31 and a 0.69 probability of 80,000 at $510. If, however, he uses the value analysis team (option b), the firm expects sales of 75,000 units at $720, with a probability of 0.75 and a 0.25 probability of 60,000 units at $720. Value engineering, at a cost of $100,000, 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.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4a44212c-b8b1-4ff0-bde6-3e570916b708%2Ff5f2867e-4ca0-4638-b98c-7443af66f86f%2Fvzuuo8m_processed.jpeg&w=3840&q=75)
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 95,000 units at $510 each, with a probability of 0.31 and a 0.69 probability of 80,000 at $510. If, however, he uses the value analysis team (option b), the firm expects sales of 75,000 units at $720, with a probability of 0.75 and a 0.25 probability of 60,000 units at $720. Value engineering, at a cost of $100,000, 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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