Solutions Operations management

Bakery Products is considering the introduction of a new line of products. In order to produce the n

Question: 4 Bakery Products is considering the introduction of a new line of products. In order to produce the new line, the bakery is considering either a major or minor renovation of the current plant. The following conditional values table has been developed by the bakery.

Alternatives Favorable Market $ Unfavorable Market $
Major Renovation 100,000 -90,000
Minor Renovation 40,000 -20,000
Do Nothing 1,000 0

Under the assumption that the probability of a favorable market is equal to the probability of an unfavorable market, determine:

(a) the EMV of a major renovation.

(b) the EMV of a minor renovation.

(c) the EMV of the do nothing option.

(d) the best alternative using EMV.

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