ronald lau, chief engineer at south dakota electronics, has to decide whether to build a new state-of-the-art processing facility. if the new facility works, the company could realize a profit of $200,000. if it fails, south dakota electronics could lose $190,000. at this time, lau estimates a 50% chance that the new process will fail. the other option is to build a pilot plant and then decide whether to build a complete facility. the pilot plant would cost $5,000 to build. lau estimates a 60% chance that the pilot plant will work. if the pilot plant works, there is a 75% probability that the complete plant, if it is built, will also work. if the pilot plant does not work, there is only a 30% chance that the complete project (if it is constructed) will work. lau faces a dilemma. by analyzing this problem, help lau to maximize his expected payoff. what is the best decision you recommend for lau and what is the expected payoff? write your answer in the space below
