The J.R. Ryland Computer Company is considering a plant expansion to enable the company to begin production of a new com

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The J R Ryland Computer Company Is Considering A Plant Expansion To Enable The Company To Begin Production Of A New Com 1 (27.38 KiB) Viewed 69 times

The J.R. Ryland Computer Company is considering a plant expansion to enable the company to begin production of a new computer product. The company's president must determine whether to make the expansion a medium- or large-scale project. Demand for the new product is uncertain, which for planning purposes may be low demand, medium demand, or high demand. The probability estimates for demand are 0.20, 0.20, and 0.60, respectively. Letting x and y indicate the annual profit in thousands of dollars, the firm's planners developed the following profit forecasts for the medium- and large- scale expansion projects. Demand Low Medium High Medium-Scale Expansion Profit * 50 150 200 0.20 0.20 0.60 Medium-Scale Large-Scale Large-Scale Expansion Profit Y 0 100 300 0.20 0.20 0.60 (a) Compute the expected value for the profit associated with the two expansion alternatives. Round your answers to whole numbers, if needed. Expected Value Medium-Scale Large-Scale Which decision is preferred for the objective of maximizing the expected profit? Large-Scale (b) Compute the variance for the profit associated with the two expansion alternatives. Round your answers to whole numbers, if needed. Variance Which decision is preferred for the objective of minimizing the risk or uncertainty? Medium-Scale