19. Company B has ordered a special purpose generator from BHEL at a cost of Rs 90 million. A critical component in the generator is subject to random failure as per probability pattern shown below. If a spare is ordered along with the order for the generator, the cost per component will be Rs 5 lacs.

However, if the component is ordered at any later date the cost along with the loss in production during the period the generator is down will be Rs 40 lacs.

Using EMV criterion, assess whether it would be beneficial to order extra components along with the initial order for the generator, and if so, the optimum number of spares to be ordered.

Number of breakdowns : 0 1 2 3 4 Probability 0.80 0.08 0.06 0.04 0.02