Before she can implement the strategy found in part (A), the marketing VP informs Proctorthat she has developed a market test for the product. She proposes to test a sample populationto determine its preference for the breakfast drink. Based on histories of similar tests, sheestimates that the sample population would not accept the drink with probability 0.2, when infact the product would be accepted by the general public. She also believes that one time inforty, the drink would be accepted by the public when the test group rejects it. Finally, sheinforms Procter that the probability that the public accepts the drink when the test groupaccepts is 0.4.C. Determine the best strategy by performing a decision tree analysis.D. How much is the expected cost of the market test? 1. Procter, president of a food company, must decide whether to market a new breakfast drinkwhich the R and D division has developed. A special meeting devoted to this topic yields thefollowing information:●The marketing vice-president has defined two possible outcomes for the success of thisproduct; either the public will accept the product, or it will not. She believes that theproduct will be accepted with probability 0.1.●The cost engineers believe that if the product is marketed and accepted, the companywill net $100,000 yearly. If the product is rejected, however, the company will suffer anet loss of $20,000 yearly. If Procter decides not to market the product, her companywill neither accrue more cost nor make any profit on this product.●Procter always makes decisions based on the expected value of the outcomes.

Find the Given details below: Given details: Profit/Loss Probability Accept the product…

Answered: Before she can implement the strategy…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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1. Procter, president of a food company, must decide whether to market a new breakfast drink which the R and D division has developed. A special meeting devoted to this topic yields the following information: ● The marketing vice-president has defined two possible outcomes for the success of this product; either the public will accept the product, or it will not. She believes that the product will be accepted with probability 0.1. The cost engineers believe that if the product is marketed and accepted, the company will net $100,000 yearly. If the product is rejected, however, the company will suffer a net loss of $20,000 yearly. If Procter decides not to market the product, her company will neither accrue more cost nor make any profit on this product. ● Procter always makes decisions based on the expected value of the outcomes. A. What is the best strategy in this case? B. Compute for EVPI.
A development corporation purchased land that will be the site of a new luxury condominium complex. Management is considering a six month market research study designed to learn more about potential market acceptance of the condominium project. Management anticipates that, if conducted, the market research study will provide one of the following two results. Favorable report (F): A significant number of the individuals contacted express interest in purchasing a condominium. Unfavorable report (U): Very few of the individuals contacted express interest in purchasing a condominium. After deciding whether to conduct the market research study, they have the following two decision alternatives. d1 = a small complex with 30 condominiums d2 = a medium complex with 60 condominiums Following this, a chance event concerning the demand for the condominiums has two states of nature. s1 = strong demand for the condominiums s2 = weak demand for the condominiums The…
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Problem 1) The Nitro Fertilizer Company is developing a new fertilizer. If Nitro markets the product and it is successful, then the company will earn a $50,000 profit; if it is unsuccessful, the company will lose $50,000. In that past, similar products have been successful 55% of the time. At a cost of $10,000, the effectiveness of the new fertilizer can be tested. If the test result is favorable, there is an 80% chance that the fertilizer will be successful. If the test result is unfavorable, there is only a 30% chance that the fertilizer will be successful. There is a 60% chance of a favorable test result and a 40% chance of an unfavorable test result. a) Construct a decision tree to determine Nitro's optimal strategy b) Find the EVSI and EVPI Note I need solution of part A only
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