Choose the correct answer and show each of the solution.

QUANTITATIVE METHODS

1. Superior Craft is evaluating the launching of a new product. If the product becomes successful, the present value of future cash flows (excluding investment) is estimated at P2,000,000. If the product is not successful, the present value of this flow is estimated at P400,000. The required investment is P1,000,000.

What are the probabilities that would have to be assigned to the events "success" and "not success" to make Superior Craft indifferent between the two actions "invest" and "do not invest"?

a. b. c. d.

Probability of success 37.5% 40% 45.5% 50%

Probability of not success 62.5% 60% 54.5% 50%

2. Clerks A, B, and C process 50%, 20%, and 30% of the sales orders, respectively. The percentage of errors made in processing a sales order by Clerks A, B, and C are 2%, 5%, and 10%, respectively. A sales order is audited and found to be in error. What is the probability that this invoice was processed by Clerk C?

a. 0.30

b. 0.60

c. 0.10

d. 0.03