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BMIS Problem 2: Decision Tree 40% A company is deciding whether to develop and launch a new product. Research and development costs are expected to
BMIS
Problem 2: Decision Tree 40% A company is deciding whether to develop and launch a new product. Research and development costs are expected to be $300.000 and there is a 70% chance that the product launch will be successful, and a 30% chance that it will fail. If it is successful, the levels of expected profits and the probability of each occurring have been estimated as follows, depending on whether the product's popularity is high, medium or low Probability Profits High 0.2 500.000 $ Medium 0.5 100.000 03 300,000 $ If it is a failure, there is a 0,6 probability that the research and development work can be sold for $50,000 and a 0.4 probability that it will be worth no reventes at all. LOW 4 points a. The total revenue of the Success-High: * 250,000 None of the answers 300,000 200,000 4 points b. The total revenue of the Fail- Nothing: -300,000 None of the answers 300,000 250,000 c. The EMV of the Success: * 8 points 100,000 None of the answers 125,000 90,000 d. The EMV of the Fail is: * 8 points None of the answers 270,000 294,480 -270,000 10 points e. The EMV of the project process is: * None of the answers 18,000 -18,000 90,000 f. Your decision as a manager: * 6 points To reject the project O To accept the project Step by Step Solution
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