Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please complete this problem and show decision tree. Problem ITSolutions Incorporated is considering introducing two new software products to the market. The company has four

Please complete this problem and show decision tree.

image text in transcribed
Problem ITSolutions Incorporated is considering introducing two new software products to the market. The company has four options regarding these products: (1] introduce neither product; [2] introduce product 1 only: (3) introduce product 2 only; or (4} introduce both product 1 and product 2. Research and development costs for product 1 is $200,000 and for product 2 is $160,000. The rst option requires no costs because research and development have not yet started. The success of these software products depends on the US economy in the coming year. The company's revenues, depending on its decision and the state of the economy, are shown in the table below: TABLE 1 ITSolutions Revenues Depending on the US Economy Options Strong Fair Weak Introduce neither product $0 $0 $0 Introduce Product 1 only $560,000 $300,000 $120,000 Introduce Product 2 only $420,000 $230,000 $100,000 23323 WOW\" 1 and $340,000 $400,000 $200,000 The probabilities of a strong, fair or weak US economy in the coming year are assessed to be 0.30, 0.50, 0.20 respectively. a} Develop a decision tree model using PrecisionTree software in Excel and identify the strategy that maximizes ITSolution's expected net revenue. b) Perform a sensitivity analysis using PrecisionTree software in Excel on the optimal decision, letting each of the inputs vary one at a time plus or minus 25% from its base value, and summarize your ndings. Which of the inputs appears to have the largest effect on the best solution

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finite Math And Applied Calculus

Authors: Stefan Waner, Steven Costenoble

7th Edition

ISBN: 1337515566, 9781337515566

More Books

Students also viewed these Mathematics questions