PROD. AND OPERATIONS MGMT. SPRING 2018 MGMT 328.002 Homework: Homework #3 Score:

Question

PROD. AND OPERATIONS MGMT. SPRING 2018 MGMT 328.002 Homework: Homework #3 Score: 0 of 5 pts Problem A.5 Sav 9 of 13 (9 complete) HW Score: 37.83%, 15.13 Question Help Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers believe that there is a probability of 0.45 that the ATR Co will come out with a competitive product. If 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 ncompete for this market. Weiss expects a loss of $80,000 a) Expected value for the Add Assembly Line option- (enter your answer as a whole numbey) kno air ger be ents can o is not

Explanation / Answer

ATR Co. Competes in Market with Added Assembly line = $15000
Probability ATR competes in Market = 0.45
ATR Co. does not Competes in Market with Added Assembly line= $50000
Probability ATR does not compete in Market = 1-0.45 = 0.55

Expected market value of added assembly line = (ATR Co. Competes in Market with Added Assembly line*Probability ATR competes in Market )
+ (ATR Co. does not Competes in Market with Added Assembly line*Probability ATR does not compete in Market)
=(15000*0.45)+(50000*0.55)
= $34250

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