Homework Help is Here – Start Your Trial Now!
Business
Operations Management
A company is deciding whether to develop and launch a new product. Research and development costs are expected to be $300,000 and there is a 60% chance that the product launch will be successful, and a 40% chance that it will fail. If it is successful, the levels of expected revenue and the probability of each occurring have been estimated as follows, depending on whether the product popularity is high, medium or low: Probability Revenue High: 0.25 $500,000 per year for two years Medium: 0.45 $400,000 per year for two years Low: 0.3 $300,000 per year for two years If it is a failure, there is a 0.55 probability that the research and development work can be sold for $60,000 and a 0.45 probability that it will be worth nothing at all. Construct a decision tree for this problem and answer this question that whether this company should develop and launch this new product. Please draw your decision tree in PrecisionTree, enter all given data, and analyze the problem over there to answer this question.

A company is deciding whether to develop and launch a new product. Research and development costs are expected to be $300,000 and there is a 60% chance that the product launch will be successful, and a 40% chance that it will fail. If it is successful, the levels of expected revenue and the probability of each occurring have been estimated as follows, depending on whether the product popularity is high, medium or low: Probability Revenue High: 0.25 $500,000 per year for two years Medium: 0.45 $400,000 per year for two years Low: 0.3 $300,000 per year for two years If it is a failure, there is a 0.55 probability that the research and development work can be sold for $60,000 and a 0.45 probability that it will be worth nothing at all. Construct a decision tree for this problem and answer this question that whether this company should develop and launch this new product. Please draw your decision tree in PrecisionTree, enter all given data, and analyze the problem over there to answer this question.

Practical Management Science
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...
See similar textbooks
icon
Related questions
Question
Problem#1 A company is deciding whether to develop and launch a new product. Research and development costs are expected to be $300,000 and there is a 60% chance that the product launch will be successful, and a 40% chance that it will fail. If it is successful, the levels of expected revenue and the probability of each occurring have been estimated as follows, depending on whether the product popularity is high, medium or low: Probability Revenue High: 0.25 $500,000 per year for two years Medium: 0.45 $400,000 per year for two years Low: 0.3 $300,000 per year for two years If it is a failure, there is a 0.55 probability that the research and development work can be sold for $60,000 and a 0.45 probability that it will be worth nothing at all. Construct a decision tree for this problem and answer this question that whether this company should develop and launch this new product. Please draw your decision tree in PrecisionTree, enter all given data, and analyze the problem over there to answer this question.
Transcribed Image Text:Problem#1 A company is deciding whether to develop and launch a new product. Research and development costs are expected to be $300,000 and there is a 60% chance that the product launch will be successful, and a 40% chance that it will fail. If it is successful, the levels of expected revenue and the probability of each occurring have been estimated as follows, depending on whether the product popularity is high, medium or low: Probability Revenue High: 0.25 $500,000 per year for two years Medium: 0.45 $400,000 per year for two years Low: 0.3 $300,000 per year for two years If it is a failure, there is a 0.55 probability that the research and development work can be sold for $60,000 and a 0.45 probability that it will be worth nothing at all. Construct a decision tree for this problem and answer this question that whether this company should develop and launch this new product. Please draw your decision tree in PrecisionTree, enter all given data, and analyze the problem over there to answer this question.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Business in Action
Business in Action
Operations Management
ISBN:
9780135198100
Author:
BOVEE
Publisher:
PEARSON CO
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.
SEE MORE TEXTBOOKS