Question: Intermediate. Darwin uses decision tree analysis in order to evaluate potential projects. The company has been looking at the launch of a new product which

Intermediate. Darwin uses decision tree analysis in order to evaluate potential projects. The company has been looking at the launch of a new product which it believes has a 70 per cent probability of success. The company is, however, considering undertaking an advertising campaign costing

£50000, which would increase the probability of success to 95 per cent.

If successful, the product would generate income of £200 000 otherwise £70 000 would be received.

What is the maximum that the company would be prepared to pay for the advertising?

(a) £32 500

(b) £29 000

(c) £17 500

(d) £50 000.

ACCA Paper 1.2 - Financial Information for Management

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