QUANTITATIVE TECHNIQUES

ASSIGNMENT

Uchenna Ogbonna | 211702 | Quantitative Analysis (MBA 702)| 8th of March 2019
 ASSIGNMENT
Question: Use a fictitious company to prepare a feasibility study then pick a
decision model and justify why you picked it.

Answer:

Define the Problem:

Iroko Foods Company is considering introducing a new product and this means
that the company will have to either build a new factory which will be used for the
production and packaging of the new products.

List the Alternatives:

1. Construct a new factory.
2. Construct a new production line in the existing factory
3. Do nothing at all.

Identify the Possible Outcomes:

The market could be favourable or unfavourable.

Select Decision Making Model:

The Decision making type for my company is Decision Making under risk because
I am aware of the probabilities of the various outcomes.

The decision model/method I will be using is to choose the alternative with the
highest expected monetary value. (EMV).

Under-listed is the Decision table that contains the data of what I used to draw my
conclusion on the decision model to take.

EMV for IROKO Foods

Alternative Favourable Unfavourable EMV (N)
Market (N) Market (N)
Construct a new Factory ₦5,000,000.00 -₦4,000,000.00 ₦500,000.00
Construct a new ₦2,500,000.00 -₦500,000.00 ₦1,000,000.00
Production line
Do nothing ₦0.00 ₦0.00 ₦0.00
Probabilities 0.5 0.5

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NB. Formulas Used:
Construct New Factory: (5000000)*(0.5) + (-4000000)*(0.5)
Construct New Line: (2500000)*(0.5) + (-500000)*(0.5)

Conclusion:
Using the EMV method I will advise the company to go for the decision with the
largest Expected Monetary Value (EMV) which is the construction of a new
production line.

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