Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The company is also considering its strategy for the next five years, expanding its production line. With a decline in sales of masks, company is
The company is also considering its strategy for the next five years, expanding its production line. With a decline in sales of masks, company is planning to make 'aviation products' or 'construction safety glasses' Production Manager would like to use your expertise, to evaluate these two choices. You have been provided the following further information and been asked to recommend one of these production lines. You are, again reminded, that the company is risk averse, trying to improve the cash flow and cutting on the costs. Aviation Products: Expand its current facilities. This is estimated to have a 69% chance of success, which will increase the cash flow by 27.5 million, but a 31% chance of failure, which will decrease the cash flow to 33 million. Construction Safety Glasses: Expand the factory and buying new machines. The probability of successfully investing in these is 55%, and the market research suggests that there would then be a 30% chance of increasing profits by 73 million and a 70% chance of increasing profits by just 12 million. However, if the market goes on the opposite direction (probability =45% ), profit is estimated to be 29 million. Do nothing. In this case, it is estimated that there is a 19% chance that profits will remain unchanged, a 54% chance that profits will increase by 35 million and a 27% chance that anticipated profits is 25 million. Using Decision Tree analysis, recommend one of the production line opportunities. You must provide justification supporting the recommendation. [16 marks ]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started