Product Overview

Angus MacIntyre, CEO of Dumbarton Bearing Supply, LLC (Dumbarton), is reviewing a proposal to invest in a new type of product: ceramic ball bearings designed for marine applications. The new bearings could open Dumbarton to new markets and make it more competitive, but demand is difficult to estimate, making the investment’s financial prospects uncertain. More problematic is deciding which of two approaches Dumbarton should use to manufacture the bearings: refitting an existing production line or building a new facility. The choice will depend on how MacIntyre chooses to evaluate the real options embedded in the two alternatives.