Problem#1A company is deciding whether to develop and launch a new product. Research and development costsare expected to be $300,000 and there is a 60% chance that the product launch will be successful, and a40% chance that it will fail.If it is successful, the levels of expected revenue and the probability of each occurring have been estimatedas follows, depending on whether the product popularity is high, medium or low:ProbabilityRevenueHigh:0.25$500,000 per year for two yearsMedium:0.45$400,000 per year for two yearsLow:0.3$300,000 per year for two yearsIf it is a failure, there is a 0.55 probability that the research and development work can be sold for $60,000and 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 shoulddevelop and launch this new product. Please draw your decision tree in PrecisionTree, enter all givendata, and analyze the problem over there to answer this question.

Answered: Image /qna-images/answer/79e56c56-98fb-4fdb-bbab-95432e2bcc1e.jpg

Answered: A company is deciding whether to…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section9.4: The Precision Tree Add-in

Problem 9P

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