Answer it using the Decision Tree Analysis .

5. Avon cosmetics wishes to determine whether or not to make a new face powder. The marketing manager may order a consumer testing program for 50,000. The present value of all future profits for a successful product is P1,000,000. The brands failure will result in a net loss of P500,000. Not marketing the face powder will not affect the profit. The manager judges that the face powder would have 60% chance of success without testing. Customer testing will either be favorable (60%) or unfavorable. Given a favorable result, the chance of product success is judged to be 75%. But for unfavorable test result, the face powder's probability is judged to be 40%. Construct a decision tree diagram. Should Avon cosmetics push the approach? Explain why?

6. Myra, a casual employee, is not feeling well due to severe cold. She has to decide whether to report for work or to stay home and rest. If she goes to work, there is 40% chance of getting sick and spending P200 for medicine. If she stays at home, P120 will be deducted from her salary for her absence. Should she go to work or rest? Please explain.

7. The market analyst of Colgate is planning to launch a new product. He can either launch Colgate with cooling crystals, Colgate with fluoride, or do nothing. If he launches Colgate with cooling crystals, the company will gain P660,000 if the market is successful or incur a loss of 220,000 if the market is a failure. If he launches Colgate with fluoride, the company will gain 2200,000 if the market is successful or incur a loss of 88,000 if the market is a failure. If the analyst does not launch anything, the company will not gain anything whether the market is a success or a failure. The probability that the market is successful is 35% and that the market is failure is 65%.

Help the market analyst decide on which to launch. How much profit or loss will the company expect?

8. Mighty has to decide whether to resign or not form his present position and apply for a job offering him twice his present monthly salary, that is, if he passes the qualifying test. At present, he receives P17,000 monthly compensation. The offer in the other company has a condition that he will be allowed to take the qualifying test unless he resigns from his present post. If he passes the qualifying test, he will immediately be taken in and have a monthly pay of 34,000. If he fails, he will remain jobless. He feels that his chance of passing is 80%?

Suppose he decides to base his decision on the expected value, should he resign from his post or not?