Lean Manufacturing class Book: Manufacturing Systems Modeling and Analysis PLEAS

Question

Lean Manufacturing class

Book: Manufacturing Systems Modeling and Analysis

PLEASE TRY TO DO IT STEP BY STEP so I can understand the procedure.

1.8. There are three investment plans for your consideration. Each plan calls for an investment of $25,000 and the return will be one year later. Plan A will return $27,500. Plan B will return $27,000 or $28,000 with probabilities 0.4 and 0.6, re- spectively. Plan C will return $24,000, $27,000, or $33,000 with probabilities 0.2, 0.5, and 0.3, respectively. If your objective is to maximize the expected return, which plan should you choose? Are there considerations that might be relevant other than simply the expected values?

Explanation / Answer

Here' a stepwise solution to how I solved this problem. Write back in case you don't understand any part of it:

The units of the below figures are in $ '000.

We have been given probabilities. Lets take out probability weighted returns for each Plan.

Plan A: Return' fixed at 27.5

Plan B: 27*.4 + 28*.6 = 27.6 (slightly better than Plan A)

Plan C: 24*.2 + 27*.5 + 33* .3 = 28.2 (best of all)

So, Plan C is best in terms of Maximum expected return

There were no considerations relevant to other than expected values

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

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