DECISION TREE APPLIED TO PRODUCT DESIGN Silicon, Inc., a semiconductor manufacturer, is investigating the possibility of producing and market-ing a microprocessor. Undertaking this project will require either purchasing a sophisticated CAD system or hiring and training several additional engineers. The market for the product could be eitherfavorable or unfavorable. Silicon, Inc., of course, has the option of not developing the new productat all.With favorable acceptance by the market, sales would be 25,000 processors selling for $100 each. Withunfavorable acceptance, sales would be only 8,000 processors selling for $100 each. The cost of CADequipment is $500,000, but that of hiring and training three new engineers is only $375,000. However,manufacturing costs should drop from $50 each when manufacturing without CAD to $40 eachwhen manufacturing with CAD. The probability of favorable acceptance of the new microprocessor is .40; the probability of unfa-vorable acceptance is .60.
DECISION TREE APPLIED TO PRODUCT DESIGN
Silicon, Inc., a semiconductor manufacturer, is investigating the possibility of producing and market-
ing a microprocessor. Undertaking this project will require either purchasing a sophisticated CAD
system or hiring and training several additional engineers. The market for the product could be either
favorable or unfavorable. Silicon, Inc., of course, has the option of not developing the new product
at all.
With favorable acceptance by the market, sales would be 25,000 processors selling for $100 each. With
unfavorable acceptance, sales would be only 8,000 processors selling for $100 each. The cost of CAD
equipment is $500,000, but that of hiring and training three new engineers is only $375,000. However,
when manufacturing with CAD.
The probability of favorable acceptance of the new microprocessor is .40; the probability of unfa-
vorable acceptance is .60.
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