Question 5: Decision Tree Company X can either buy or redesign a product. If the company decides to buy, there is a 70%

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Question 5 Decision Tree Company X Can Either Buy Or Redesign A Product If The Company Decides To Buy There Is A 70 1 (83.27 KiB) Viewed 11 times

Question 5: Decision Tree Company X can either buy or redesign a product. If the company decides to buy, there is a 70% chance that it will pay 85000$ as fixed cost and variable cost 2$ each item, and a 30% chance that it would pay 100,000$ as fixed cost and variable cost 1$ per item. Company X must spend 30,000 dollars to obtain a new machine in order to redesign the product. The firm has 80% chance to produces the products and 20% chance to produce nothing. To produce the products, there is a 50% chance of hiring new engineers at an extra cost of 60,000$ and a variable cost of 1.2$ each product, and a 50% chance of using existing staff at an additional cost of 40,000$ and a variable cost of 1$ per item. If the company product's demand quantity is 10,000 unit. 1. Calculate the EMV of the two choices (buying and redesigning). 2. Which choice is better (buying or redesigning)? Explain.