Question: 7. TCE is currently working with a process which after paying for materials, labour, etc., brings a profit of Rs.1.2Lakhs. The following alternatives are made

7. TCE is currently working with a process which

7. TCE is currently working with a process which after paying for materials, labour, etc., brings a profit of Rs.1.2Lakhs. The following alternatives are made available to the company: (i) The company can conduct research (R1) which is expected to cost Rs.1 Lakh having 90% chance of success. If it proves a success, the company get a gross income of Rs.2.5Lakhs (ii) The company can conduct research (R2) which is expected to cost Rs.80K having a probability of 60% success, the gross income will be Rs.3Lakhs. (iii) The company can pay Rs.60K as royalty for new products which will bring a gross income of Rs.2 Lakhs (iv) The company continues the current process. Because of the limited resources, it is assumed that only one of the two types of research can be carried out at a time. Use decision tree analysis to locate the optimal strategy for the company

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