Question: You are the production manager at ING’s Schockoe Bottom Heavy Rolling Plant in Richmond . Your plant has received a special order to produce structural girders for a new sports stadium in Washington, DC. In order to complete the order, you will have to procure a new hot rolling unit to finish the girders at the end of the production; the company will be penalized $150.000 in accordance with the current contract.

This morning two sales reps came into your office to discuss the future of their products:

For $ 50,000, the Vulcan Machinery workers of Ames, Iowa can provide a general purpose hot roller that has approximately a 70 % chance of completing the order on time. An engineering economic analysis of this machine indicates that you could gross $275,000 from finishing the girders with this machining.

A Japanese company (Kurosawa Industries) has proposed to provide a highly specialized hot roller that utilizes a much more efficient process. The efficiency improvements are so great that you realize a $450,000 gross by using machinery. However, the Japanese machine costs $70,000 and requires much more care and maintenance and thus only has a 55% chance of completing the order on time.

Draw a decision tree and decide what action to take. If perfect information is available, what is the most that you would be willing to pay or it?