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MJ Logistics has decided to build a new warehouse to support its supply chain activities. They have the option of building either a large warehouse or a small one. Construction costs are $8 million for the large facility versus $3 million for the small facility. The profit (excluding construction cost) depends on the volume of work the company expects to contract for C

MJ Logistics has decided to build a new warehouse to support its supply chain activities. They have the option of building either a large warehouse or a small one. Construction costs are $8 million for the large facility versus $3 million for the small facility. The profit (excluding construction cost) depends on the volume of work the company expects to contract for C

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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MJ Logistics has decided to build a new warehouse to support its supply chain activities. They have the option of building either a large warehouse or a small one. Construction costs are $8 million for the large facility versus $3 million for the small facility. The profit (excluding construction cost) depends on the volume of work the company expects to contract for in the future. This is summarized in the following table (in millions of dollars): Large warehouse Small warehouse High Volume Low Volume $35 $20 $25 $15 The company believes that there is a 60% chance that the volume of demand will be high. Construct a decision tree to identify the best choice. Hint: Low demand volume probability is 40% and construction costs must be deducted from branch payoffs!
Transcribed Image Text:MJ Logistics has decided to build a new warehouse to support its supply chain activities. They have the option of building either a large warehouse or a small one. Construction costs are $8 million for the large facility versus $3 million for the small facility. The profit (excluding construction cost) depends on the volume of work the company expects to contract for in the future. This is summarized in the following table (in millions of dollars): Large warehouse Small warehouse High Volume Low Volume $35 $20 $25 $15 The company believes that there is a 60% chance that the volume of demand will be high. Construct a decision tree to identify the best choice. Hint: Low demand volume probability is 40% and construction costs must be deducted from branch payoffs!
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