Question
Ling Li of Li Windows, Inc. is considering making a change in the material the firm uses for panes in its residential window line. The
Ling Li of Li Windows, Inc. is considering making a change in the material the firm uses for panes in its residential window line. The new material has a slight mirror attribute that assists in reflecting ultraviolet light and restricts the transmission of heat. The new material will raise the cost of a standard window by
$3.36.
The current window is in the mature stage of the life cycle, and, with no modifications, Li has estimated that sales of the window line will be
250,000
units per year with a probability of
0.2
or
180,000
units per year with a probability of
0.8.
The standard net profit of a window unit is
$35.
With the new glass material, the selling price per unit can be increased by
$5
(but with the added cost per unit, the net profit will be
(($35+$5)$3.36)=$36.64).
However, Li estimates that the demand for the newly designed window will be
220,000
units with a probability of
0.5,
and there will be a
0.5
probability of sales of
150,000
units.
Part 2 When using the existing material, the expected monetary value
(EMV)=$_________
(enter your response as a whole number).
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