MacDonald Products, Inc., of Clarkson, New York, has the option of

(a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or

(b) having the value analysis team complete a study.

If Tyrone Martin, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be

90,000

units at

$620

each, with a probability of

0.25

and a

0.75

probability of

80,000

at

$620.

If, however, he uses the value analysis team (option b), the firm expects sales of

75,000

units at

$750,

with a probability of

0.66

and a

0.34

probability of

70,000

units at

$750.

Value engineering, at a cost of

$85,000,

is only used in option b. Which option has the highest expected monetary value (EMV)?

MacDonald Products, Inc., of Clarkson, New York, has the option of (a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or (b) having the value analysis team complete a study. If Tyrone Martin, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 90,000 units at $620 each, with a probability of 0.25 and a 0.75 probability of 80,000 at $620. If, however, he uses the value analysis team (option b), the firm expects sales of 75,000 units at $750, with a probability of 0.66 and a 0.34 probability of 70,000 units at $750. Value engineering, at a cost of $85,000, is only used in option b. Which option has the highest expected monetary value (EMV)? The EMV for option a is \$ and the EMV for option b is \$ Therefore, option has the highest expected monetary value. (Enter your responses as integers.)