The ABC Co

Essay

The ABC Co.is considering a new consumer product.They believe there is a probability of 0.4 that the XYZ Co.will come out with a competitive product.If ABC adds an assembly line for the product and XYZ does not follow with a competitive product, their expected profit is $40,000; if they add an assembly line and XYZ does follow, they still expect a $10,000 profit.If ABC adds a new plant addition and XYZ does not produce a competitive product, they expect a profit of $600,000; if XYZ does compete for this market, ABC expects a loss of $100,000.
(a)Determine the EMV of each decision.
(b)Determine the EOL of each decision.
(c)Compare the results of (a)and (b).
(d)Calculate the EVPI.