Question
Montgomery Berdini is the Vice President of Business Development at a mid-sized cat food manufacturer on the outskirts of Etobicoke, Ontario. Recently, Montgomery has been
Montgomery Berdini is the Vice President of Business Development at a mid-sized cat food manufacturer on the outskirts of Etobicoke, Ontario. Recently, Montgomery has been contemplating branching out into dog food production as well. He brings the idea to his boss Murphy.
Montgomery argues: "I've done some research and if our marketing team is able to leverage all of their existing contacts, we could bring in up to $5,000,000 in the first year by branching out, which is really good considering the cost would only be $1,000,000. But even if they can't leverage ALL of their contacts, they should at least be able to bring in $400,000, which is still something we can build on.
Murphy replies: "That sounds promising. But the marketing team is pretty new and I will have to decide to either do nothing or take a chance on branching out. Thus, I need to know how likely the marketing team leveraging all their contacts has to be for us to make a profit.
Follow Murphy's request and calculate how high the probability of the marketing team being able to leverage all of their existing contacts has to be to make branching out more profitable than keeping things the way they are.
Be sure to provide a sentence that answers the question, after you have done the math.
Step by Step Solution
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