WURLWIND APPLIANCE COMPANY Harvard Case Solution & Analysis

WURLWIND APPLIANCE COMPANY Case Solution

Then we have maximin, which gives us the minimum pay-off available. This would be appropriate when the conditions are worse. Here we will choose the maximum value under this category that is 9,265,912 which is of outsource to China. The last category is of equally likely. Here the result shows the values when the conditions are stable and we will choose new plant in Mexico with the highest value. This model perfectly analyze the risk in projects according to investors’ risk.

EMV MODEL (SENSITIVITY ANALYSIS)

We will change the probabilities of the situation as compared to previous EMV model. Again we will choose the highest value. We have increased the probability of favorable situation from 0.43 to 0.52 and unfavorable market probability remains same. Now we will see that the values of both of the plants, new plant in Mexico and New plant in Houston has increased to $16934523 each. Hence we will choose both of these plants.

Therefore, the model gives us a clear idea that what will happen when we will change the probabilities and is appropriate for risk measurement.................

 

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