QUESTION 3 A. PTB sells personal computers on which it gives a one-year warranty. PTB is...

Transcribed Image Text:

QUESTION 3 A. PTB sells personal computers on which it gives a one-year warranty. PTB is estimating the cost of claims for next year. If all products under warranty need minor repairs, the total cost is estimated to be R2 million. If all products under warranty need major repairs, it would cost R6 million. If all products under warranty need to be replaced, it would cost R10 million. Based on past experience EF has estimated that 80% of products under warranty will require no repairs, 15% will require minor repairs, 3% will require major repairs and 2% will need to be replaced. Required: NB:DO NOT DRAW A DECISION TREE. Calculate the total expected value of the cost of warranty claims for next year. B.A company is considering whether to develop and market a new product. The cost of developing the product is estimated to be R150.000. There is a 70% probability that the development will succeed and a 30% probability that the development will be unsuccessful. If the development is successful, the product will be marketed. There is a 50% chance that the marketing will be very successful, and the product will make a profit of R250 000. There is a 30% chance that the marketing will be reasonably successful, and the product will make a profit of R150 000 and a 20% chance that the marketing will be unsuccessful and the product will make a loss of R80 000. The profit and loss figures stated are after taking account of the development costs of R150 000. Required: NB:DO NOT DRAW A DECISION TREE. -How much will be the expected value if the development phase is successful? (2) -How much will the expected value be if the development phase fails? (2) - Calculate the overall expected value of the decision to develop and market the product. 6 (24 QUESTION 3 A. PTB sells personal computers on which it gives a one-year warranty. PTB is estimating the cost of claims for next year. If all products under warranty need minor repairs, the total cost is estimated to be R2 million. If all products under warranty need major repairs, it would cost R6 million. If all products under warranty need to be replaced, it would cost R10 million. Based on past experience EF has estimated that 80% of products under warranty will require no repairs, 15% will require minor repairs, 3% will require major repairs and 2% will need to be replaced. Required: NB:DO NOT DRAW A DECISION TREE. Calculate the total expected value of the cost of warranty claims for next year. B.A company is considering whether to develop and market a new product. The cost of developing the product is estimated to be R150.000. There is a 70% probability that the development will succeed and a 30% probability that the development will be unsuccessful. If the development is successful, the product will be marketed. There is a 50% chance that the marketing will be very successful, and the product will make a profit of R250 000. There is a 30% chance that the marketing will be reasonably successful, and the product will make a profit of R150 000 and a 20% chance that the marketing will be unsuccessful and the product will make a loss of R80 000. The profit and loss figures stated are after taking account of the development costs of R150 000. Required: NB:DO NOT DRAW A DECISION TREE. -How much will be the expected value if the development phase is successful? (2) -How much will the expected value be if the development phase fails? (2) - Calculate the overall expected value of the decision to develop and market the product. 6 (24

Answer rating: 100% (QA)

The provided image shows a question divided into two parts A and B each requiring the calculation of expected values based on different probabilities and outcomes Lets solve each part step by step Par... View the full answer