E) none of the above 2. Silicon Valley Tablet Manufacturing has two options 1.)
ID: 351054 • Letter: E
Question
E) none of the above 2. Silicon Valley Tablet Manufacturing has two options 1.) Immediately produce a new top of the line tablet or 2.) Hiring a Consulting firm to conduct a usability study. If the VP for Supply Chain Operations, produces the new top of the line tablet, we can assume the following: The firm can expect sales to 100,000 units at $550 each-with a probability of .6. The firm can also anticipate that 75,000 units at $550 each with a probability of .4 However, if she hires the Consulting firm, the firm expects sales of 75,000 units@ $750 each with a probability of .7. The firm can also anticipate to sell 70,000 units @ $750 with a probability of.3. Usability Analysis, which is only performed in the Consulting firm option, will cost an additional $100,000. Which option has the highest EMV Expected Monetary Valuation)? Show your calculations (5 points)Explanation / Answer
1) Produce a new top of the line tablet EMV = 100,000*550*.60 + 75000*550*.40
= 33000000 + 16500000
= 49500000 $
2) Hire consultant EMV = 75000*750*.7 + 70000*750*.3 = 39375000 + 15750000 - 100,000 = 55025000 $
Option 2 Hire consultant has the highest EMV.
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