A multinational corporation is considering starting a subsidiary in an Asian country. Management realizes that the success of the new subsidiary depends, in part, on the ensuing political climate in the target country. Management estimates that the probability of success (in terms of resulting revenues of the subsidiary during its first year of operation) is 0.55 if the prevailing political situation is favorable, 0.30 if the political situation is neutral and 0.10 if the political situation during the year is unfavorable.
Management further believes that the probabilities of favorable, neutral, and unfavorable political situations are 0.6, 0.2, and 0.2, respectively. What is the success probability of the new subsidiary?

  • CreatedJune 03, 2015
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