a) Explain the distinction between risk and uncertainty.

b) What is probability distribution? What is measured by the coefficient of variation?

c) Avator Pte Ltd is considering whether to develop and market a new product. Development costs are estimated to be 180,000, and there is a 0.75 probability that the development effort will be successful, and a 0.25 probability that the development effort will be unsuccessful. If the development is successful, the product will be marketed, and the possible profit outcomes and their associated probabilities are:

	PROFIT/(LOSS) ()	PROBABILITY
1.PRODUCT VERY SUCCESSFUL	540000	0.4
2. PRODUCT MODERATELY SUCCESSFUL	100000	0.3
3. PRIDUCTS FAILS	(400000)	0.3

Each of the profit and loss calculations are shown after taking account of the 180,000 development costs.

Required:

Using decision tree analysis, determine the best course of action.