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ABC Company is investigating the possibility of producing and marketing backyard storage sheds. Undertaking this project would require the construction of either a large or
ABC Company is investigating the possibility of producing and marketing backyard storage sheds. Undertaking this project would require the construction of either a large or a small manufacturing plant and of investment respectively The market for the product producedstorage sheds could be either favorable or unfavorable. ABC, of course, has the option of not developing the new product line at all.
With a favorable market, a large facility will bring ABC a net profit of $ If the market is unfavorable, a $ net loss will occur. A small plant will result in a net profit of $ in a favorable market, but a net loss of $ will be encountered if the market is unfavorable.
The probabilities of the market being favorable or unfavorable are estimated to be equal.
Should ABC build small or large manufacturing facility, or not build any plant at all?
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