Kroft Food Products is attempting to decide whether it should introduce a new line of salad dressings called Special Choices. The company can test market the salad dressings in selected geographic areas or bypass the test market and introduce the product nationally. The cost of the test market is $150,000. If the company conducts the test market, it must wait to see the results before deciding whether to introduce the salad dressings nationally. The probability of a positive test market result is estimated to be 0.6. Alternatively, the company can decide not to conduct the test market and go ahead and make the decision to introduce the dressings or not. If the salad dressings are introduced nationally and are a success, the company estimates that it will realize an annual profit of $1.6 million, whereas if the dressings fail, it will incur a loss of $700,000. The company believes the probability of success for the salad dressings is 0.50, if they are introduced without the test market. If the company does conduct the test market and it is positive, then the probability of successfully introducing the salad dressings increases to 0.8. If the test market is negative and the company introduces the salad dressings anyway, the probability of success drops to 0.30. Using decision tree analysis, determine whether the company should conduct the test market.
Kroft Food Products is attempting to decide whether it should introduce a new line of salad dressings called Special Choices. The company can test market the salad dressings in selected geographic areas or bypass the test market and introduce the product nationally. The cost of the test market is $150,000. If the company conducts the test market, it must wait to see the results before deciding whether to introduce the salad dressings nationally. The probability of a positive test market result is estimated to be 0.6. Alternatively, the company can decide not to conduct the test market and go ahead and make the decision to introduce the dressings or not. If the salad dressings are introduced nationally and are a success, the company estimates that it will realize an annual profit of $1.6 million, whereas if the dressings fail, it will incur a loss of $700,000. The company believes the probability of success for the salad dressings is 0.50, if they are introduced without the test market. If the company does conduct the test market and it is positive, then the probability of successfully introducing the salad dressings increases to 0.8. If the test market is negative and the company introduces the salad dressings anyway, the probability of success drops to 0.30. Using decision tree analysis, determine whether the company should conduct the test market.
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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please show all your steps (including decision trees)
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Kroft Food Products is attempting to decide whether it should introduce a new line of salad
dressings called Special Choices. The company can test market the salad dressings in selected
geographic areas or bypass the test market and introduce the product nationally. The cost of the
test market is $150,000. If the company conducts the test market, it must wait to see the results
before deciding whether to introduce the salad dressings nationally. The probability of a positive
test market result is estimated to be 0.6. Alternatively, the company can decide not to conduct
the test market and go ahead and make the decision to introduce the dressings or not. If the salad
dressings are introduced nationally and are a success, the company estimates that it will realize
an annual profit of $1.6 million, whereas if the dressings fail, it will incur a loss of $700,000. The
company believes the probability of success for the salad dressings is 0.50, if they are introduced
without the test market. If the company does conduct the test market and it is positive, then the
probability of successfully introducing the salad dressings increases to 0.8. If the test market is
negative and the company introduces the salad dressings anyway, the probability of success drops
to 0.30.
Using decision tree analysis, determine whether the company should conduct the test market.
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