# Probability Analysis .Harley-Davidson

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### Document Description

A General Manger of Harley-Davidson has to decide on the size of a new facility. The GM has narrowed the choices to two: large facility or small facility. The company has collected information on the payoffs. It now has to decide which option is the best using probability analysis, the decision tree model, and expected monetary value.
Options:
Facility Demand Options Probability Actions Expected Payoffs

Large Low Demand 0.4 Do Nothing (\$10)
Low Demand 0.4 Reduce Prices \$50
High Demand 0.6 \$70

Small Low Demand 0.4 \$40
High Demand 0.6 Do Nothing \$40
High Demand 0.6 Overtime \$50
High Demand 0.6 Expand \$55

Determination of chance probability and respective payoffs:
Build Small:
Low Demand 0.4(\$40)=\$16
High Demand 0.6(\$55)=\$33

Build Large:
Low Demand 0.4(\$50)=\$20
High Demand 0.6(\$70)=\$42
Determination of Expected Value of each alternative

Build Small: \$16+\$33=\$49

Build Large: \$20+\$42=\$62

## Written By

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Running head: HARLEY-DAVIDSON1Harley-DavidsonStudent NameInstitutionHARLEY-DAVIDSON2In this case, a general manager of Harley Davidson wants to decide on the size of anew facility. The general manager has narrowed the decision choices to two: either to build alarge facility or a small facility. The manager collected information on the payoffs. Themanager wants to decide the best option using the probability analysis, the decision treemodel and the expected monetary value. A manager is want to decide whether to build asmall or a large facility. The demand can be low or high with the estimated probabilitiesbeing 0.4 and 0.6 for low demand and high demand respectively. A small facility is expectedto earn \$16 if demand is low and a small facility is expected to earn \$33 if the demand ishigh. A large facility is expected to earn \$42 if the demand is high. If the demand i

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