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The Doorco Corporation is a leading manufacturer of garage doors. All doors are manufactured in their plant in Carmel, Indiana, and shipped to distribution centers
The Doorco Corporation is a leading manufacturer of garage doors. All doors are manufactured in their plant in Carmel, Indiana, and shipped to distribution centers or major customers. Doorco recently acquired another manufacturer of garage doors, Wisconsin Door, and is considering moving its wood door operations to the Wisconsin plant. Key considerations in this decision are the transportation, labor, and production costs at the two plants. Complicating matters is the fact that marketing is predicting a decline in the demand for wood doors. The company developed the following three scenarios: Scenario 1 (Probability of happening 0.15): Demand falls slightly, with no noticeable effect on production Scenario 2 (Probability of happening 0.40): Demand and production decline 20% Scenario 3 (Probability of happening 0.45): Demand and production decline 40% The following table shows the total costs under each decision and scenario. Slight Decline 20% Decline 40% Decline Stay in Carmel $1,000,000 $800,000 $840,000 Move to Wisconsin $1,100,000 $950,000 $750,000 Use this information to answer the following: a) What is the expected Value of the decision "Stay in Carmel" b) What is the Expected Value of the decision "Move to Wisconsin" c) Should DoorCo Stay in Carmel or Move to Wisconsin? Explain your
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