Lancaster Technology is considering introducing a new electronic testing devise.

Currently, it is looking at two designs.

Product $1$ requires an investment of $1\mathrm{.}5$ million dollar, while product $2$ requires $1\mathrm{.}8$ million dollars.

Two possible market conditions are possible, namely: favorable $(60\%)$ and unfavorable $(40\%).$

Both products have an expected market life of $5$ years.

The estimated cash flows for the two products are as follows.

Product $1$

Product $2$

Year

Favorable Acceptance

Unfavorable Acceptance

Favorable Acceptance

Unfavorable Acceptance

$1$

$700$

$500$

$800$

$500$

$2$

$800$

$600$

$1000$

$700$

$3$

$1000$

$800$

$1250$

$900$

$4$

$750$

$500$

$850$

$500$

$5$

$500$

$350$

$600$

$350$

The company uses a discount rate of $15\%.$

$700$

Construct the payoff table.Lancaster Technology is considering introducing a new electronic testing devise. Currently, it is looking at two designs.

Product $1$ requires an investment of $1\mathrm{.}5$ million dollar, while product $2$ requires $1\mathrm{.}8$ millic dollars.

Two possible market conditions are possible, namely: favorable $(60\%)$ and unfavorable $(40\%).$

Both products have an expected market life of $5$ years.

The estimated cash flows for the two products are as follows.

Product $1$

Favorable

Acceptance

$700$

$800$

$1000$

$750$

$500$

Unfavorable

Acceptance

$500$

$600$

$800$

$500$

$350$

Product $2$

$\backslash$table$[[$Year$,\backslash$table$[[$Favorable$],[$Acceptance$]],\backslash$table$[[$Unfavorable$],[$Acceptance$]],\backslash$table$[[$Favorable$],[$Acceptance$]],\backslash$table$[[$Unfavorable$],[$Acceptance$]]],[1,700,500,800,500],[2,800,600,1000,700],[3,1000,800,1250,900],[4,750,500,850,500],[5,500,350,600,350]]$

The company uses a discount rate of $15\%.$

Construct the payoff table.

Using the expected monetary value criterion, which product should be introduced?

Calculate the expected value of perfect information