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# Problem 55-9 (Static) A firm must decide whether to construct a small, medium, or large stamping plant A consultant's report indicates a. 20 probabitity that dernand will be low and an 80 probability that demand will be high. If the firm bullds a small facilty and demand tums out to be low, the net present value will be $\$ 42$million. If demand turns out to be high, the firm can etther subcontract and realize the net present value of$\$42$ million or expand greatly for a net present value of $\$ 48$million. The firm could bulid a medium-size faclity as a hedge. If demand turns out to be low, its net present value is estmated at$\$22$ million; if demand turns out to be high, the firm could do nothing and realize a net present value of $\$ 46 \mathrm{million}$, or it could expand and realize a net present value of$\$50$ million. If the firm bullds a large facility and demand is low, the net present value will be $-\$ 20$million, whereas high demand will result in a net present value of$\$72$ million. b. What is the maximin alternative? (Negative amount should be indicated by a minus sign.) c. Compute the EVPL. (Round your answer to 1 decimal place) d. Perform sensitivity analysis on P(high). (Round your Intercept and Slope answers to nearest whole number and EV answer to 2 decimal places. Negative amount should be indicated by a minus sign.) \begin{tabular}{|c|c|c|c|c|c|} \hline & & Intercept & \multicolumn{2}{|c|}{ Slope } \\ \hline 1 & Small & & + & & $x$ \\ \hline II & Medium & & + & & $x$ \\ \hline III & Lagge & & + & & $x$ \\ \hline \end{tabular} Smal and lige EV 3 ame at $x=$

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