Question
A new product's sales and profits are uncertain. The marketing department has predicted that sales might be as high as 10,000 units per year with
A new product's sales and profits are uncertain. The marketing department has predicted that sales might be as high as 10,000 units per year with a probability of 10%. The most likely value is 7000 units annually. The pessimistic value is estimated to be 5000 units annually with a probability of 20%. Manufacturing and marketing together have estimated the most likely unit profit to be $32. The pessimistic value of $24 has a probability of 0.3, and the optimistic value of $38 has a probability of 0.2. Construct a probability distribution for the annual profit. Assume that the sales and unit profits are statistically independent. (Answers: Annual Profit, Prob.; $120,000, 6%; $160,000, 10%; $190,000, 4%; $168,000, 21%; $224,000, 35%; $266,000, 14%; $240,000, 3%; $320,000, 5%; $380,000, 2%)
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