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The class is Applied Business Decisions. Any help is greatly appreciated.

A particular company is considering a 7 million dollar research and development project. Profit projections appear promising, but the president of the company is concerned because the probability that the R and D project will be successful as only 0.50. Secondly the president knows that even if the project is successful, it will require that the company build a new production facility at a cost of 20 million dollars in order to manufacture the product. If the facility is built uncertainty remains about the demand and the sensor and D about the profit that will be realized. Another option is that if the R and D project is successful, the company could sell the rights to the product for necessary to 27 million dollars. Under this option the company would not build the 20 million dollar production facility.

The profit projection for each outcome is shown at the end of the branch is. For example, the revenue production for the high demand outcome is 65 million dollars. However, the cost of R and D project, and estimated 7 million, and the cost of the production facility, an extra 20 million dollars, shows the profit of this outcome to be $65 - $7 - $20=$38 million dollars. Branch probabilities are also shown for the chance events.

Other bookmarks 9 Reading li A particular company is considering a $7 million research and development (R&D) project. Profit projections appear promising, but the president of the company is concerned because the probability that the R&D project will be successful is only 0.50. Secondly, the president knows that even if the project is successful, it will require that the company build a new production facility at a cost of $20 million in order to manufacture the product. If the facility is built, uncertainty remains about the demand and thus uncertainty about the profit that will be realized. Another option is that if the R&D project is successful, the company could sell the rights to the product for an estimated $27 million. Under this option, the company would not build the $20 million production facility, Consider the decision tree. Profit (s millions) High Demand 38 Medium Demand Building Facility $20 million) 20 3 Low Demand 10 Successful 3 5 Start R&D Project Sell Rights Is million) 20 1 Not Successful -7 Do Not start R&D Project 0 The profit projection for each outcome is shown at the end of the branches. For example, the revenue projection for the high-demand outcome is $55 million. However, the cost of the R&D project (37 million) and the cost of the production facility ($20 million) show the profit of this outcome to be $65 - 57 - $20 = 539 million. Branch probabilities are also shown for the chance events. (a) Analyze the decision tree to determine whether the company should undertake the R&D project. If it does, and if the R&D project is successful, what should the company do? Start the R&D project. If it is successful, sell the rights. Start the R&D project. If it is successful, build the facility. Do not start the R&D project. What is the expected value of your strategy (in millions of dollars)? million dollars (b) What must the minimum selling price (in millions of dollars) be for the company to consider selling the rights to the product? million dollars. The selling price must be at least () Develop a risk profile for the optimal strategy. (Submit a file with a maximum size of 1 MB) Choose File Ne file chosen This answer has not been graded yet Profit ($ millions) High Demand .5 Medium Demand Building Facility (520 million) Low Demand Successful 3 5 Start R&D Preject Sel Rights ($7 million) 1 Not success - 7 5 De Pot Start R&D Prelec 0 The profit projection for each outcome is shown at the end of the branches. For example, the revenue projection for the high-demand outcome is $65 million. However, the cost of the R&D proje facility ($20 million) show the profit of this outcome to be $65 - $7 - $20 = $38 million. Branch probabilities are also shown for the chance events. (a) Analyze the decision tree to determine whether the company should undertake the R&D project. If it does, and if the R&D project is successful, what should the company do? O Start the R&D project. If it is successful, sell the rights. O Start the R&D project. If it is successful, build the facility. O Do not start the R&D project. What is the expected value of your strategy (in millions of dollars)? million dollars (b) What must the minimum selling price (in millions of dollars) be for the company to consider selling the rights to the product? The selling price must be at least million dollars. (c) Develop a risk profile for the optimal strategy. (Submit a file with a maximum size of 1 MB.) Choose File No file chosen This answer has not been graded yet. Need Help? Read 1 Other bookmarks 9 Reading li A particular company is considering a $7 million research and development (R&D) project. Profit projections appear promising, but the president of the company is concerned because the probability that the R&D project will be successful is only 0.50. Secondly, the president knows that even if the project is successful, it will require that the company build a new production facility at a cost of $20 million in order to manufacture the product. If the facility is built, uncertainty remains about the demand and thus uncertainty about the profit that will be realized. Another option is that if the R&D project is successful, the company could sell the rights to the product for an estimated $27 million. Under this option, the company would not build the $20 million production facility, Consider the decision tree. Profit (s millions) High Demand 38 Medium Demand Building Facility $20 million) 20 3 Low Demand 10 Successful 3 5 Start R&D Project Sell Rights Is million) 20 1 Not Successful -7 Do Not start R&D Project 0 The profit projection for each outcome is shown at the end of the branches. For example, the revenue projection for the high-demand outcome is $55 million. However, the cost of the R&D project (37 million) and the cost of the production facility ($20 million) show the profit of this outcome to be $65 - 57 - $20 = 539 million. Branch probabilities are also shown for the chance events. (a) Analyze the decision tree to determine whether the company should undertake the R&D project. If it does, and if the R&D project is successful, what should the company do? Start the R&D project. If it is successful, sell the rights. Start the R&D project. If it is successful, build the facility. Do not start the R&D project. What is the expected value of your strategy (in millions of dollars)? million dollars (b) What must the minimum selling price (in millions of dollars) be for the company to consider selling the rights to the product? million dollars. The selling price must be at least () Develop a risk profile for the optimal strategy. (Submit a file with a maximum size of 1 MB) Choose File Ne file chosen This answer has not been graded yet Profit ($ millions) High Demand .5 Medium Demand Building Facility (520 million) Low Demand Successful 3 5 Start R&D Preject Sel Rights ($7 million) 1 Not success - 7 5 De Pot Start R&D Prelec 0 The profit projection for each outcome is shown at the end of the branches. For example, the revenue projection for the high-demand outcome is $65 million. However, the cost of the R&D proje facility ($20 million) show the profit of this outcome to be $65 - $7 - $20 = $38 million. Branch probabilities are also shown for the chance events. (a) Analyze the decision tree to determine whether the company should undertake the R&D project. If it does, and if the R&D project is successful, what should the company do? O Start the R&D project. If it is successful, sell the rights. O Start the R&D project. If it is successful, build the facility. O Do not start the R&D project. What is the expected value of your strategy (in millions of dollars)? million dollars (b) What must the minimum selling price (in millions of dollars) be for the company to consider selling the rights to the product? The selling price must be at least million dollars. (c) Develop a risk profile for the optimal strategy. (Submit a file with a maximum size of 1 MB.) Choose File No file chosen This answer has not been graded yet. Need Help? Read 1