Does anyone know the answer to this question?

Toy companies have to decide which toys to produce months before their biggest sales months, November and December. Suppose a toy company can have high, medium, or low sales of their new toys. Historically, 40% of toys have had low sales, 35% have had medium sales, and 25% have had high sales. The value (net of production costs) for each type of sales is as follows:

High Sales $420,000

Medium Sales. $300,000

Low Sales. -$20,000

Toy producers often perform a market study to determine the likeability factor of a toy. The cost of doing such a study is approximately $42,000. Of course, toy producers could produce a new toy without performing a market study, based on the managers own opinions and anecdotal evidence. The results of a market study are classified aspositive or negative feedback. Historically, 60% of the market studies have resulted in positive feedback and 40% have results in negative feedback. After the result of the study is known, the toy company may decide whether to produce the toy. The following table shows probabilities that the toy product will have high, medium, or low sales based on the results of a market study:

High Sales Medium Sales Low Sales

Positive Results 0.71 0.22 0.07

Negative Results 0.21 0.36 0.43

For a decision tree demonstrating this problem, see the sheet labeled Practice Assignment 2 Tree in the Excel file in the Chapter 16 folder on Moodle.

1. a) If the toy producer does not perform a market study, what is the optimal decision under expected value?

2. b) Find the overall optimal strategy by rolling back the tree.