Essay About Expected Value And New Facilityexpand Current Facilitycost

Engineering Risk Management
PaperOnEngineering Risk ManagementByDateQ1. Build New FacilityExpand Current FacilityCost $      15,000,000.00  $                   8,000,000.00  High DemandModerate DemandProb.0.350.65 DemandBuild New FacilityExpand Current FacilityHigh $      25,000,000.00  $                 15,000,000.00 Moderate $      15,000,000.00  $                 10,000,000.00 Decision Tree:Profit (Rev-Cost)Expected ValueHigh Demand $  10,000,000.00 Build New Facility0.35Decision Node $                   3,500,000.00 Moderate Demand $                          –   0.65High Demand $    7,000,000.00 Expand Current Facility0.35 $                   3,750,000.00 Moderate Demand $    2,000,000.00 0.65Explanation:Based on the Expected Value, the higher monetary value would be gained by Cardinal Company through the Expansion of the Current Facility, as it has the higher Expected Value of $3750000.There might be many other factors which can affect this decision. Other than the economic condition and revenue and cost related to both decisions, the company might need to consider the government policies in the upcoming years for businesses which could be favorable or unfavorable.