Question
Carlisle Tire and Rubber, Inc., is considering expanding production to meet potential increases in the demand for one of its tire products. Carlisles alternatives are
Carlisle Tire and Rubber, Inc., is considering expanding production to meet potential increases in the demand for one of its tire products. Carlisles alternatives are to construct a new plant, expand the existing plant, or do nothing in the short run. The market for this particular tire product may expand, remain stable, or contract. Carlisles marketing department estimates the probabilities of these market outcomes to be 0.25, 0.35, and 0.40, respectively. The file P06_31.xlsx contains Carlisles payoffs and costs for the various combinations of decisions and outcomes. A. Identify the strategy that maximizes this tire manufacturers expected profit B. Perform a sensitivity analysis on the optimal decision, letting each of the monetary inputs vary one at a time plus or minus 10% from its base value and summarize your findings. Which of the inputs appears to have the largest effect on the best solution?
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