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ABC Inc. is considering launching a new product and there are two options: product X and product Y. Product X requires an initial investment of
ABC Inc. is considering launching a new product and there are two options: product X and product Y. Product X requires an initial investment of $15 million and product Y requires 55 million. The gross profit (before subtracting the initial investment) that can be generated by each product depends on the market condition. If the market is strong, product X can generate a gross profit of $100 million and product Y can generate $20 million; ifthe market is weak, product X will lead to a loss of $80 million and product Y will cause a loss of $9 million (before subtracting the initial investment). The company's prior belief of a strong market is 60%. To get a better understanding of the market before deciding the choice of the new product, the manager hired a consulting firm to conduct a market research. According to historical data, this consulting firm can successfully predict a strong market in 65% cases and can correctly predict a weak market in 55% cases. Based on this information, which of the following statement(s) is(are) true? (A) If the consulting firm is not hired, it is better not to introduce any product. (B) If there is not historical data about the consulting firm, $38 million should be paid at most to hire the company. (C) If the consulting firm gave an unfavorable report, ABC should introduce product X. (D) The expect value of the consulting firm's report is about $3.12 million. (E) None ofthe above
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