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Mathematics, 16.03.2020 19:25 lavorisjonesjr1

The J. R. Ryland Computer Company is considering a plant expansion thatwill enable the company to begin production of a new computer product. The company’s president must determine whether to make the expansion amedium- or large-scale project. An uncertainty is the demand for the newproduct, which for planning purposes may be low demand, medium demand, or high demand. The probability estimates for demand are .20, .50, and .30,respectively. Letting x indicate the annual profit in $1000’s, the firm’splanners have developed the following profit forecasts for the medium- andlarge-scale expansion projects. Medium-scale Large-scaleExpansion Profits Expansion ProfitsDemand x P (x) y P (y)Low 50 .20 0 .20Medium 150 .50 100 .50High 200 .30 300 .30(a) Compute the expected value for the profit associated with the two expansionalternatives. Which decision is preferred for the ob jective ofmaximizing the expected profit?(b) Compute the variance for the profit associated with the two expansionalternatives. Which decision is preferred for the objective of minimizingthe risk or uncertainty?

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