Question 3 Lazio Enterprises is considering launching a new professional football kit, which is expected to have an 80% probability of success. The Marketing Department of Lazio Enterprises has reassured their CEO that, if successful, the football kit would generate income of £840,000; otherwise an income of only £294,000 would have to be considered. Despite the long time spent in designing and crafting the new product, the CEO of Lazio Enterprises is still not confident that the new kit will be properly addressing the market segment they are intending to target (kids between 16 and 19 years of age). She has, therefore, asked you for help in preparing a Memorandum to evaluate whether it could be appropriate to associate the launch with an additional advertising campaign. The advertising campaign would cost £40,000 and, it is estimated, it would increase the probability of success of the new football kit to 90%. Required: (a) Compute the overall expected loss or gain from obtaining the additional information from the advertising campaign. (b) Prepare a Memorandum for Lazio Enterprises' CEO to discuss and advise about the financial aspects computed in part (a). In the Memorandum, include any other factors that should also be considered in the decision. (c) Critically discuss whether a tool like the Balanced Scorecard should differ from organisation to organisation, and, if so, how.
Question 3 Lazio Enterprises is considering launching a new professional football kit, which is expected to have an 80% probability of success. The Marketing Department of Lazio Enterprises has reassured their CEO that, if successful, the football kit would generate income of £840,000; otherwise an income of only £294,000 would have to be considered. Despite the long time spent in designing and crafting the new product, the CEO of Lazio Enterprises is still not confident that the new kit will be properly addressing the market segment they are intending to target (kids between 16 and 19 years of age). She has, therefore, asked you for help in preparing a Memorandum to evaluate whether it could be appropriate to associate the launch with an additional advertising campaign. The advertising campaign would cost £40,000 and, it is estimated, it would increase the probability of success of the new football kit to 90%. Required: (a) Compute the overall expected loss or gain from obtaining the additional information from the advertising campaign. (b) Prepare a Memorandum for Lazio Enterprises' CEO to discuss and advise about the financial aspects computed in part (a). In the Memorandum, include any other factors that should also be considered in the decision. (c) Critically discuss whether a tool like the Balanced Scorecard should differ from organisation to organisation, and, if so, how.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 3
Lazio Enterprises is considering launching a new professional football kit, which is expected to
have an 80% probability of success. The Marketing Department of Lazio Enterprises has
reassured their CEO that, if successful, the football kit would generate income of £840,000;
otherwise an income of only £294,000 would have to be considered.
Despite the long time spent in designing and crafting the new product, the CEO of Lazio
Enterprises is still not confident that the new kit will be properly addressing the market segment
they are intending to target (kids between 16 and 19 years of age). She has, therefore, asked you
for help in preparing a Memorandum to evaluate whether it could be appropriate to associate the
launch with an additional advertising campaign.
The advertising campaign would cost £40,000 and, it is estimated, it would increase the probability
of success of the new football kit to 90%.
Required:
(a) Compute the overall expected loss or gain from obtaining the additional information from
the advertising campaign.
(b) Prepare a Memorandum for Lazio Enterprises' CEO to discuss and advise about the
financial aspects computed in part (a). In the Memorandum, include any other factors that
should also be considered in the decision.
(c) Critically discuss whether a tool like the Balanced Scorecard should differ from organisation
to organisation, and, if so, how.
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