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1. ASSIGNMENTS Assignments need to be submitted by the due times specified in the syllabus. Late submission will be automatically cut off, and zero grades

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1. ASSIGNMENTS Assignments need to be submitted by the due times specified in the syllabus. Late submission will be automatically cut off, and zero grades are applied. Assignment 1 Situation Description: A company is considering the launch of a new product. Based on prior experience in this industry, the manager knows that there is a probability of 0.65 that the product will be successful and bring a net profit of $3.2 million. However, there is also a probability of 0.35 under which the launch will be unsuccessful and the firm will suffer a loss of $1.5 million. The net profit is zero if the new product is not launched. Questions: (1) Based on the above figures, what is the expected payoff of this new product upon launch? (2) Suppose there is a market report available from IRI that could forecast with 100% correction whether the launch will be successful or not, should the manager consider buying this report? (3) If your answer to the above (2) is yes, what should be the Maximum price that the manager is willing to pay

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