An engineer who works for a company that produces equipment for the food-processing

Question 2:  An
engineer who works for a company that produces equipment for the
food-processing industry has been asked to consider the development of a new
type of processor and to make a recommendation to the company’s board. Two
alternative power sources could be used for the processor, namely gas and
electricity, but for technical reasons each power source would require a
fundamentally different design. Resource constraints mean that the company will
only be able to pursue one of the designs and, because the processor would be
more advanced than others that have been developed, it is by no means certain
that either design would be a success. The engineer estimates that there is a
80% chance the electricity-powered design would be successful and only a 60%
chance that the gas-powered design would be successful. If either design fails,
then the company would still consider modifying the design, although this would
involve more involvement and would still not guarantee success.
If
the electric-powered design is
selected and it’s a success, then the company is estimated to earn $12 million.
If the electrical design fails, the engineer estimates that the probability
that it could be successfully modified is only 40%. If the modification is a
success, then the company will earn $7 million. However, if it’s a failure,
then the firm will lose $8 million. On the other hand, if the electrical design
is not a success and the company decides to abandon the project, then this will
cost the company $4 million.
If
the gas-powered design is selected
and it’s a success, then the company is estimated to earn $16 million. If the
gas design fails, the engineer estimates that the probability that it could be
successfully modified is 75%. If the modification is a success, then the
company will earn $11 million. However, if it’s a failure, then the firm will
lose $12 million. On the other hand, if the gas design is not a success and the
company decides to abandon the project, then this will cost the company $8
million.
a)
Draw a complete decision tree for
this problem. Clearly present the decision and event nodes, the associated
probabilities, and the payoffs.
b)
What should the management do to
achieve the highest expected payoff?
2.
(Chapter
2)
Read and watch the video case “Project Management at the Phoenician” on page 86
of the textbook and answer the following questions.
a)
Construct a network diagram for the
spa selection process.
b)
How soon can The Phoenician
management make a decision on the spa?
c)
Calculate the slack for each
activity. Why is it important for a project manager to identify slack of
activities?
d) Many
times, project decision makers do not rely solely on financial hurdles, such as
return on investment or internal rates of return, but place a lot of emphasis
on intangible factors. Which are the salient intangible factors associated with
selecting one of the three options for the spa?

3. (Chapter 3)
A department store chain is designing a layout for a new store. The store
manager wants to provide as much convenience as possible for her customers.
Based on historical data, the number of trips between departments per hour is
given in the following closeness matrix. A block plan showing a preliminary
layout is also shown.
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Customer travel between
departments is restricted to the aisles shown in the block plan as dotted
lines.
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a)
Calculate the weighted-distance
score for the given layout (assume 20 feet distance between adjacent store).
b)
Use trial and error to find a
better layout. How much better is your layout than the current layout in terms
of weighted-distance score?