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a. The construction manager for ALIM Construction, Inc. must decide whether to ...

May 8, 2024

Solution by Steps

step 1

Calculate the expected monetary value (EMV) for single-family homes using the probabilities and profits provided

step 2

EMV for single-family homes:

EMV_{\text{single-family}} = 0.45 \times 150 + 0.3 \times 190 + 0.25 \times 170

step 3

Using the asksia-ll calculator result:

EMV_{\text{single-family}} = 167

step 4

Calculate the expected monetary value (EMV) for apartments using the probabilities and profits provided

step 5

EMV for apartments:

EMV_{\text{apartments}} = 0.45 \times 100 + 0.3 \times 170 + 0.25 \times 190

step 6

Using the asksia-ll calculator result:

EMV_{\text{apartments}} = 143.5

step 7

Calculate the expected monetary value (EMV) for condominiums using the probabilities and profits provided

step 8

EMV for condominiums:

EMV_{\text{condominiums}} = 0.45 \times (-50) + 0.3 \times 100 + 0.25 \times 220

step 9

Using the asksia-ll calculator result:

EMV_{\text{condominiums}} = 62.5

step 10

Compare the EMVs to determine the highest value

step 11

The highest EMV is for single-family homes, which is MYR 167

[1] Answer

The construction manager should choose to build single-family homes, as they have the highest expected monetary value of MYR 167.

Key Concept

Expected Monetary Value (EMV)

Explanation

EMV is calculated by multiplying each outcome by its probability and summing the results. The option with the highest EMV is typically chosen as it represents the best average outcome over many trials.