1. Modern Electronics specializes in manufacturing modern electronic components.
ID: 1942282 • Letter: 1
Question
1. Modern Electronics specializes in manufacturing modern electronic components. It also builds the equipment that produces the components. Modern Electronics is considering building a new facility but the estimated profits would be impacted by the type of market that develops. The probability for a strong market is 0.3; for a fair market is 0.5; and for a poor market is 0.2. You are responsible for advising the president of Modern Electronics on the type facility that should be built or to not build a facility at all. The table shows the estimated profits under each market and for each size facility.Estimated Profits
Strong Market Fair Market Poor Market
Build a large facility 550,000 110,000 -310,000
Build a medium-size facility 300,000 129,000 -100,000
Build a small facility 200,000 100,000 -32,000
Do not build a facility 0 0 0
Using the information in the table above develop a recommendation for your president. Be sure to explain why you are making the recommendation and you must include a recommendation that maximizes profits and a recommendation that minimizes loss.
Explanation / Answer
Modern Electronics specializes in manufacturing modern electronic components. It also builds the equipment that produces the components. Modern Electronics is considering building a new facility but the estimated profits would be impacted by the type of market that develops. The probability for a strong market is 0.3; for a fair market is 0.5; and for a poor market is 0.2. You are responsible for advising the president of Modern Electronics on the type facility that should be built or to not build a facility at all. The table shows the estimated profits under each market and for each size facility. Strong Fair Poor Build a large 550,000 110,000 -310,000 Build a medium-size 300,000 129,000 -100,000 Build a small 200,000 100,000 -32,000 Do not build a 0 0 0 develop a recommendation for your president. Be sure to explain why you are making the recommendation that maximizes profit and minimizes lost Strong Fair Poor Expected Value Large 550000 110000 -310000 158000 Medium 300000 129000 -100000 134500 Small 200000 100000 -32000 103600 None 0 0 0 0 Probability 0.3 0.5 0.2 We see from the table of payoff and expected values that if the company builds a large facility, its expected profit will be the highest. Therefore, it is recommended that the company build a large-size facility. Refer this : http://www.justanswer.com/math/3mk7t-1-modern-electronics-specializes-manufacturing-modern.html
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