A company is considering the expansion of its current facility to meet increasing demand. A major expansion would cost $500,000, while a minor expansion would cost $200,000. If demand is high in the future, the major expansion would result in an additional profit of $800,000, but if demand is low, then there would be a loss of $500,000. If demand is high, the minor expansion will result in an increase in profits of $200,000, but if demand is low, then there is a loss of $100,000. The company has the option of not expanding.
For what probability of a high demand will the company be indifferent between the two expansion alternatives?

0.7

Explanation:

                                               States of Nature

Alternatives               Demand is High                      Demand is Low

Major Expansion       $800, 000 - $500,000        -$500,000 -$500,000

Minor Expansion       $200, 000 - $200,000       -$100, 000 - $200,000

Doing Nothing            $0                                           $0

                                              States of Nature

Alternatives               Demand is High                  Demand is Low

Major Expansion       $300,000                           -$1,000,000

Minor Expansion      $0                                        -$300,000

Doing Nothing         $0                                           $0  

Let D to be the probability of the high demand;

Then:

300,000 × D - 1,000,000 × (1 - D) = 0 × D - 300,000 × (1 - D)

300,000D - 1,000,000 - 1,000,000D = -300,000 + 300, 000D

-700,000 D -1,000,000 = -300,000 + 300,000 D

-1,000,000 + 300,000 = 700,000 D + 300,000 D

700,000 = 1,000, 000 D

D = 700,000/1,000,000

D = 0.7  

∴ the probability of a high demand that the company will be indifferent between the two expansion alternatives = 0.7

i would go with get a bachelor’s degree

hope i

-lavira : )

if it is for a job, then you should learn everything you can about the job, like what does it involve, what qualification is required and how you are the right person for that job. dress appropriately for the interview. get plenty of rest the night before. good luck!