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Global Studios is thinking of producing a megafilm, Aqua World, which could be a megahit or a megaflop. Profit is uncertain for two reasons: (1)

Global Studios is thinking of producing a megafilm, Aqua World, which could be a megahit or a megaflop. Profit is uncertain for two reasons: (1) the cost of producing the film may be low or high, and (2) the market reception for the film may be strong or weak. There is a .5 chance of low costs (C) and a .5 chance of high costs. The probability of strong demand (D) is .4; the probability of weak demand is .6. The studios profits (in millions of dollars) for the four possible outcomes are shown in the table.

LOW C / STRONG D LOW C / WEAK D HIGH C/ STRONG 4 HIGH C / WEAK D
80 10 0 -70

a.Should the studio produce the film? Use a decision tree to justify your answer.

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