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jaffeisabel
jaffeisabel
02.03.2020 • 
Business

A sailboat enthusiast is considering the possibility of starting a company to produce smallsailboats for the recreational market. Unlike other mass-produced sailboats, these boats will be made specifically for children ages 10-15. The boats will be of the highest qualityand extremely stable, and sail size will be reduced to prevent problems of capsizing. The basic decision to be made is whether to build a large manufacturing facility, a small facility or no facility at all. With a favorable market, the owner can expect to make $90,000 from the large facility, $60,000 from the smaller facility. If the market is unfavorable, the owner estimates that she would lose $30,000 with a large facility and shewould lose only $20,000 with the small facility. A pilot study will be conducted to test the market and will cost the owner $10,000. The pilot study can be either favorable or unfavorable. The owner estimates that the probability of a favorable market given a favorable pilot study in 0.8. The probability of an unfavorable market given an unfavorable pilot study is 0.90. The owner feels that there is a 0.65 chance that the pilot study will be favorable. Of course the owner could bypass the pilot study and simply make a decision as to whether to build a large plant of a small plant or no facility at all. ISEE 350Hmwk 5Due 2/25/20Without doing any testing in a pilot study, she estimates that the probability of a favorable market is 0.60. What do you recommend

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