50.1K

Verified Solution

Link Copied!

(even Fiorentino Aliers is the production manager of Electronics Manufacturer. Due to limited capacity, the company can only produce one of two possible products: . An industrial motherboard with a 70% probability of making a profle of $1 million and a 30% probability of making a profit of $140,000 A regular motherboard with a 100% chance of making a profit of $700,000. Florentino will get a 20% bonus from his department. Florentino has the responsibility to choose between the two products and is more of a risk-taker, more so than most of the top management at Electronics Manufacturer A. Which option is Florentino more likely to choose and why? Florentino will choose the industrial motherboard since he is a rak.taker, and a 70% chance of a $1 million profit is much the though there is a 30% chance of a $140,000 profit with the industri motherboard), B. Which option would the company be more likely to choose and why? The company, being a taker than Florentino, would prefer the regular motherboard because of the certainty of earning While the expected value of the industrial motherboards the potential difference of to offset the (30% chance) of only earning $140,000, C. What changes should the company make to Florentino's compensation to avoid unnecessary risks? The company should the size of the bonus and the salary, thus leveling the playing field when it comes to risk taking

Answer & Explanation Solved by verified expert

See Answer