Howard Weiss, Inc., is considering building a sensitive new airport scanning dev

Question

Howard Weiss, Inc., is considering building a sensitive new airport scanning device.His managers believe that there is a probability of 0.40 that the ATR Co. will come out with a competitive product. It Weiss adds an assembly line for the product and ATR Co. does not follow with a competitive product, Weiss's expected profit is $50,000; if Weiss adds an assembly line and ATR follows suit, Weiss still expects $15,000 profit. If Weiss adds a new plant addition and ATR does not produce a competitive product, Weiss expects a profit of $600,000; if ATR does not compete for this market, Weiss expects a loss of $100,000.

expected value for the building new plant option $

Explanation / Answer

Howard Weiss, Inc., is considering building a sensitive new airport scanning device.His managers believe that there is a probability of 0.40 that the ATR Co. will come out with a competitive product. It Weiss adds an assembly line for the product and ATR Co. does not follow with a competitive product, Weiss's expected profit is $50,000; if Weiss adds an assembly line and ATR follows suit, Weiss still expects $15,000 profit. If Weiss adds a new plant addition and ATR does not produce a competitive product, Weiss expects a profit of $600,000; if ATR does not compete for this market, Weiss expects a loss of $100,000.

Expected value for the building new plant = 600000*(1-0.4) - 100000*0.40

Expected value for the building new plant = $ 320,000

Answer

Expected value for the building new plant option $ 320,000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.