Glotyne Corporation is considering modernizing one of its manufacturing plants. Two choices are being considered:
(a) Replace all worn and obsolete machinery with modern machinery that uses essentially the same technology at a total cost of about $2,500,000.
(b) Replace all machinery with a fully computer integrated manufacturing (CIM) system at a total cost of about $4,000,000.
Corporate policy is to determine the economic value of all capital expenditure proposals using the net present value method. Analyses based on the most realistic data available result in a positive net present value of $500,000 for the existing technology alternative and a negative net present value of $50,000 for the CIM alternative. Concerned about the results of the economic analyses, top management called a meeting of marketing and manufacturing managers for the purpose of identifying nonfinancial benefits desired from plant modernization. The managers unanimously agreed that modernization should result in a more flexible manufacturing facility that will reduce setup time and decrease throughput time, thereby shortening production lead times and making the company more competitive. In addition, they agreed that modernization should improve product quality, reduce inventory levels, and improve the company's image to outsiders.
The corporate controller suggested use of multi-attribute decision model, which would consider nonfinancial factors as well as the results of the economic analysis. The controller suggested that the management group assign a weight to each desired benefit that reflected its relative importance. Although the managers could agree on which factors were important, they did not unanimously agree on the relative importance of each factor. However, after considerable debate, a compromise was reached and the following relative factor weights were assigned:

Next, the managers were directed to rate how well each modernization alternative would achieve the benefits desired and to determine the likelihood that the level of benefit expected would be achieved. For each alternative, each factor was assigned an achievement rating of 0, 1, or 2, depending on whether the alternative was expected to provide an unsatisfactory, a satisfactory, or a more than satisfactory benefit, respectively. A likelihood estimate for each factor was determined by averaging the managers' subjective probability estimates. The following averages resulted:

Required:
Using the multi-attribute decision model, determine which alternative approach to plant modernization Glotyne management should undertake.

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Relative Importance Weighting 30 20 15 15 10 10 Factor t value... Reduce throughput time.... Improve product quality.. Reduce inventory levels. Improve image to outsiders Total 100 Existing Technology New Technology A Rating Estimate ng Estimate Achievement Likelihood Achievement Likelihood Factor Net present value. Reduce setup time .. Reduce throughput time Improve product quality. Reduce inventory levels.. Improve image to outsiders.. .8 .5 .5 2 2 2 .5 .9 Reduce setup time 6 .6