Your company, Drones, INC, must decide on their path forward in regard to new or expanded facilities for drone production. The table below shows the potential profits/losses for each decision alternative in each of 4 market conditions (states of nature). Note that the numbers in red (with a minus sign) are losses. NOTE: I have provided some extra columns and rows for your computations. NÓTE THAT THE OBJECTIVE IS TO MAXIMIZE PROFIT. STATES OF NATURE FOR POTENTIAL MARKETS FOR DRONES DECISION ALTERNATIVES EXCELLENT GOOD FAIR POOR 6 $400,000 -$200,000 -$500,000 OPEN 2 NEW PLANTS FOR PRODUCTION $600,000 $200,000 -$100,000 -$300,000 OPEN 1 NEW PLANT FOR PRODUCTION $500,000 -$100,000 ΕXPAND CURRENT PLANT $150,000 $75,000 $0 DO NOTHING $0 $0 $0 $0
Your company, Drones, INC, must decide on their path forward in regard to new or expanded facilities for drone production. The table below shows the potential profits/losses for each decision alternative in each of 4 market conditions (states of nature). Note that the numbers in red (with a minus sign) are losses. NOTE: I have provided some extra columns and rows for your computations. NÓTE THAT THE OBJECTIVE IS TO MAXIMIZE PROFIT. STATES OF NATURE FOR POTENTIAL MARKETS FOR DRONES DECISION ALTERNATIVES EXCELLENT GOOD FAIR POOR 6 $400,000 -$200,000 -$500,000 OPEN 2 NEW PLANTS FOR PRODUCTION $600,000 $200,000 -$100,000 -$300,000 OPEN 1 NEW PLANT FOR PRODUCTION $500,000 -$100,000 ΕXPAND CURRENT PLANT $150,000 $75,000 $0 DO NOTHING $0 $0 $0 $0
Transcribed Image Text:18. Management first wants to know which decision to make if they assume each state of
nature is equally likely.
Transcribed Image Text:Your company, Drones, INC, must decide on their path forward in regard to new or expanded
facilities for drone production. The table below shows the potential profits/losses for each
decision alternative in each of 4 market conditions (states of nature). Note that the numbers in
red (with a minus sign) are losses. NOTE: I have provided some extra columns and rows for
your computations. NÓTE THAT THE OBJECTIVE IS TO MAXIMIZE PROFIT.
STATES OF NATURE FOR POTENTIAL
MARKETS FOR DRONES
DECISION
EXCELLENT GOOD
FAIR
POOR
ALTERNATIVES
OPEN 2 NEW
$600,000
$400,000 -$200,000 -$500,000
PLANTS FOR
PRODUCTION
OPEN 1 NEW
PLANT FOR
$200,000 -$100,000 -$300,000
$500,000
PRODUCTION
EΧPAND
$150,000
$75,000
$0
-$100,000
CURRENT
PLANT
DO NOTHING
$0
$0
$0
$0
6.
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