Engineering Risk Management
Autor: Fizz • October 4, 2018 • Term Paper • 788 Words (4 Pages) • 376 Views
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Engineering Risk Management
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Q1.
| Build New Facility | Expand Current Facility |
Cost | $ 15,000,000.00 | $ 8,000,000.00 |
| High Demand | Moderate Demand |
Prob. | 0.35 | 0.65 |
Demand | Build New Facility | Expand Current Facility |
High | $ 25,000,000.00 | $ 15,000,000.00 |
Moderate | $ 15,000,000.00 | $ 10,000,000.00 |
Decision Tree:
Profit (Rev-Cost) | |||
Expected Value | High Demand | $ 10,000,000.00 | |
Build New Facility | 0.35 | ||
Decision Node | $ 3,500,000.00 | Moderate Demand | $ - |
0.65 | |||
High Demand | $ 7,000,000.00 | ||
Expand Current Facility | 0.35 | ||
$ 3,750,000.00 | Moderate Demand | $ 2,000,000.00 | |
0.65 |
Explanation:
Based on the Expected Value, the higher monetary value would be gained by Cardinal Company through the Expansion of the Current Facility, as it has the higher Expected Value of $3750000.
There might be many other factors which can affect this decision. Other than the economic condition and revenue and cost related to both decisions, the company might need to consider the government policies in the upcoming years for businesses which could be favorable or unfavorable.
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