A company is deciding which one of four products to launch. The expected payoff from each of the products is shown below. Profit Demand Probability Product A Product B Product C Product D High 0.5 20,000 50,000 40,000 30,000 Medium 0.3 20,000 20,000 20,000 Low 0.2 20,000 -50,000 10,000 Required 1. Calculate the expected profit of each product. 2. If the company wants to maximize the expected profit, which product should be launched?
A company is deciding which one of four products to launch. The expected payoff from each of the products is shown below. Profit Demand Probability Product A Product B Product C Product D High 0.5 20,000 50,000 40,000 30,000 Medium 0.3 20,000 20,000 20,000 Low 0.2 20,000 -50,000 10,000 Required 1. Calculate the expected profit of each product. 2. If the company wants to maximize the expected profit, which product should be launched?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A company is deciding which one of four products to launch. The expected payoff from each
of the products is shown below.
Profit
Demand
Probability
Product A
Product B
Product C
Product D
High
0.5
20,000
50,000
40,000
30,000
Medium
0.3
20,000
20,000
20,000
Low
0.2
20,000
-50,000
10,000
Required
1. Calculate the expected profit of each product.
2. If the company wants to maximize the expected profit, which product should be launched?
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