Prepare an assembly chart the ball-point pen you considered for problem 1. Micha

Question

Prepare an assembly chart the ball-point pen you considered for problem 1. Michael s Engineering. Inc. manufactures components for the ever-changing notebook computer business He is considering moving from a small custom design facility to an operation capable of much more rapid design of components This means that Michael must consider upgrading his CAD equipment Option 1 is to purchase two new desktop CAD systems at $100,000 each. Option 2 is to purchase an integrated system and the related server at $500,000 Michael's sales manager has estimated that if the market for notebook computers continues to expand, sales over the life of either system will be $1,000,000 He places the odds of this happening at 40%. He thinks the likelihood of the market having already peaked to be 60° o and future sales to be only $700,000. What do you suggest Michael do and what is the EMV of this decision ?

Explanation / Answer

Expected Monetary Value (EMV)

EMV is the weighted average of possible outcomes. This is the expected average payoff of all possible outcomes.

In the given question Michael

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