HW5-5S: Decision Theory Online HomeworkQuestion

A firm must decide whether to construct a small, medium, or large stamping plant. A consultant's report
indicates a 0.30 probability that demand will be low and a 0.70 probability that demand will be high.
If the firm builds a small facility and demand turns out to be low, the net present value will be $40 million. If
demand turns out to be high, the firm can either subcontract and realize the net present value of $52 million or
expand greatly for a net present value of $48 million.
The firm could build a medium-size facility as a hedge: If demand turns out to be low, its net present value is
estimated at $12 million; if demand turns out to be high, the firm could do nothing and realize a net present
value of $45 million, or it could expand and realize a net present value of $50 million.
If the firm builds a large facility and demand is low, the net present value will be -$30 million, whereas high
demand will result in a net present value of $75 million.
a. Draw a decision tree for this problem.
b. Which size of facility the firm should construct? What is the expected payoff for this alternative?
a. Conclusion: Build a small facility, with an expected payoff of $48.4 million.
b. Conclusion: Build a large facility, with an expected payoff of $48.4 million.
c. Conclusion: Build a medium facility, with an expected payoff of $58.6 million.

HW6-Ch16-Scheduling Online Homework Question

The following table contains information concerning four jobs that are awaiting processing at a work center.
Job

Processing Time Due Date (days from

(days)
present time)

17

14

12

20

10

15

FCFS: What is the makespan?

a. 37 days
b. 64 days
c. 90 days
SPT: What is the average flow time?
a. 8.25 days
b. 19.75 days

c. 2.13 days
EDD: What is the average job tardiness?
a.26.25 days
b. 10.25 days
c. 6.50 days