nachine is purchased and demand is low, the net present value is $110,000. If demand is high, the manager has three options. Doing nothing has a t value of $110,000; subcontracting, $140,000; and buying the second machine, $130,000. ose the correct decision tree for this problem. Note that each payoff is given in thousands of dollars. OB. Q Low demand Low demand -80 Do nothing 110 Q лу 1 achine - 110 Buy 1 0.30 Do nothing High demand Subcontract machine 110 140 C High demand Subcontract Buy 2 140 Low demand - 130 0.70 110 machines Buy 2 uy 2 achines Buy 2 130 machines High demand 160 Low demand 80 machines 0.30 D. Low demand Low demand 110 Do nothing 110 Do nothing - 110 лу 1 achine 0.30 Buy 2 0.30 110 High demand 0.70 LOw demand Subcontract machines High demand Subcontract 140 C 140 C Buy 2 0.70 Low demand Buy 1 130 130

nachine is purchased and demand is low, the net present value is $110,000. If demand is high, the manager has three options. Doing nothing has a t value of $110,000; subcontracting, $140,000; and buying the second machine, $130,000. ose the correct decision tree for this problem. Note that each payoff is given in thousands of dollars. OB. Q Low demand Low demand -80 Do nothing 110 Q лу 1 achine - 110 Buy 1 0.30 Do nothing High demand Subcontract machine 110 140 C High demand Subcontract Buy 2 140 Low demand - 130 0.70 110 machines Buy 2 uy 2 achines Buy 2 130 machines High demand 160 Low demand 80 machines 0.30 D. Low demand Low demand 110 Do nothing 110 Do nothing - 110 лу 1 achine 0.30 Buy 2 0.30 110 High demand 0.70 LOw demand Subcontract machines High demand Subcontract 140 C 140 C Buy 2 0.70 Low demand Buy 1 130 130

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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course: advanced microeconomics
What P(s1) would the decision-maker be indifferent between the "buy" and "make" decisions, all other data input remaining the same?
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