Need to find most amount Steve should pay.
Steve is the director of operations for a diamond company. The company is considering whether to launch a new product line, which will require building a new facility. The research required to produce the new product has not been proven to work in a full-scale operation. If Steve decides to build the new facility and the process is successful, the company will earn a profit of $740,000. If the process is unsuccessful, his company will realize a loss of $930,000. Steve estimates that the probability of the full-scale process succeeding is 65%. Steve has the option of constructing a pilot plant for $64,000 to test the new process before deciding to build the full-scale facility. From prior experience, Steve knows that there is a 79% probability that the pilot plant will be successful if the new facility proves to be successful. Likewise, there is an 11% probability that the pilot plant will be successful if the new facility proves to be unsuccessful. Complete parts a and b below. a. Structure this problem with a decision tree and advise Steve what to do. Construct a decision tree with all of the known information labeled. Choose the correct answer below. Click the icon to view decision tree b. 10 11 Click the icon to view decision tree c. Click the icon to view decision tree d. Click the icon to view decision treo a. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Advise Steve what to do. Choose the correct answer below. A. Steve should do nothing B. Steve should build the facility initially. c. Steve should build the pilot plant initially. If the pilot plant works, he should build the facility. If the pilot plant does not work, he should not build the facility D. Steve should build the pilot plant initially. If the pilot plant works, he should not build the facility. If the pilot plant does not work, he should build the facility. b. What is the most Steve should pay to construct the pilot plant? (Round to the nearest dollar as needed.) 40 41 42 Steve is the director of operations for a diamond company. The company is considering whether to launch a new product line, which will require building a new facility. The research required to produce the new product has not been proven to work in a full-scale operation. If Steve decides to build the new facility and the process is successful, the company will earn a profit of $740,000. If the process is unsuccessful, his company will realize a loss of $930,000. Steve estimates that the probability of the full-scale process succeeding is 65%. Steve has the option of constructing a pilot plant for $64,000 to test the new process before deciding to build the full-scale facility. From prior experience, Steve knows that there is a 79% probability that the pilot plant will be successful if the new facility proves to be successful. Likewise, there is an 11% probability that the pilot plant will be successful if the new facility proves to be unsuccessful. Complete parts a and b below. a. Structure this problem with a decision tree and advise Steve what to do. Construct a decision tree with all of the known information labeled. Choose the correct answer below. Click the icon to view decision tree b. 10 11 Click the icon to view decision tree c. Click the icon to view decision tree d. Click the icon to view decision treo a. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Advise Steve what to do. Choose the correct answer below. A. Steve should do nothing B. Steve should build the facility initially. c. Steve should build the pilot plant initially. If the pilot plant works, he should build the facility. If the pilot plant does not work, he should not build the facility D. Steve should build the pilot plant initially. If the pilot plant works, he should not build the facility. If the pilot plant does not work, he should build the facility. b. What is the most Steve should pay to construct the pilot plant? (Round to the nearest dollar as needed.) 40 41 42
