a) A technology company is making a decision about ordering a new tablet to sell during...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
a) A technology company is making a decision about ordering a new tablet to sell during the holiday season. They are deciding whether or not to undertake market research to evaluate the potential market for the product. They have only one opportunity to order the product for this season and are committed to making either a small order or a large order. If they choose not to undertake the research, they can make one of two choices: place a large order or place a small order. If they place an order the probability that demand is high is 50% and that demand is low is 50%. If they undertake the market research, the chance that they will get favourable results is 45% and unfavourable results is 55%. If they get unfavourable results, the probability of high demand is 25% and of low demand is 75%. If they get favourable results, the probability of high demand is 80% and of low demand is 20%. The cost of doing the research is $10,000. If they place a small order and demand is low the net return is $10,000. If they place a small order and demand is high the net return is $100,000. If they place a large order and demand is low the return is $- 50,000. If they place a large order and demand is high the net return is $200,000. What are the right decisions for the firm to make relative to the market research and the size of the order? What are the associated expected values. If you were asked to minimize the maximum loss, what would your decision be? b) Now consider only the "no market research" branch of your decision tree (there should be one). If someone could tell you definitively whether demand would be high or low (without doing market research), what would be the value of knowing (i.e. the expected value of perfect information). a) A technology company is making a decision about ordering a new tablet to sell during the holiday season. They are deciding whether or not to undertake market research to evaluate the potential market for the product. They have only one opportunity to order the product for this season and are committed to making either a small order or a large order. If they choose not to undertake the research, they can make one of two choices: place a large order or place a small order. If they place an order the probability that demand is high is 50% and that demand is low is 50%. If they undertake the market research, the chance that they will get favourable results is 45% and unfavourable results is 55%. If they get unfavourable results, the probability of high demand is 25% and of low demand is 75%. If they get favourable results, the probability of high demand is 80% and of low demand is 20%. The cost of doing the research is $10,000. If they place a small order and demand is low the net return is $10,000. If they place a small order and demand is high the net return is $100,000. If they place a large order and demand is low the return is $- 50,000. If they place a large order and demand is high the net return is $200,000. What are the right decisions for the firm to make relative to the market research and the size of the order? What are the associated expected values. If you were asked to minimize the maximum loss, what would your decision be? b) Now consider only the "no market research" branch of your decision tree (there should be one). If someone could tell you definitively whether demand would be high or low (without doing market research), what would be the value of knowing (i.e. the expected value of perfect information).
Expert Answer:
Answer rating: 100% (QA)
Decision Making for Tablet Order with Market Research Option a Decisions and Expected Values 1 With Market Research Favorable Results 45 chance High D... View the full answer
Related Book For
Posted Date:
Students also viewed these general management questions
-
You will use information from this entry in your presentation. Include the following for Netflix: List the benefits of data administration compared to database administration for Netflix. Propose an...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
A corporate entity has both preferred and common classes of shares. How is the book value of common shares calculated in this case? What is meant by the liquidation value of preferred shares?
-
Jim Thome has prepared the following list of statements about bonds. 1. Bonds are a form of interest-bearing notes payable. 2. When seeking long-term financing, an advantage of issuing bonds over...
-
Wingler Communications Corporation (WCC) produces premium stereo headphones that sell for $28.80 per set, and this years sales are expected to be 450,000 units. Variable production costs for the...
-
During the inspection of a rejected integrated circuit (IC), it was observed that the rejected IC could have an incorrect circuit, it could be bent, or it could have both defects. The probability of...
-
A dealer buys tooling machines from a manufacturer and resells them to its customers. a. The manufacturer sets a list or catalogue price of $12,000 for a machine. The manufacturer offers its dealers...
-
You purchase one Apple Tree Inc February 115 call contract for a premium of $7.00. You hold the option until the expiration date when Apple Tree stock sells for $108.14 per share. Calculate gain/loss...
-
Maggie's Magazines (MM) has straight nonconvertible bonds that currently yield 9%. MM's stock sells for $22 per share, has an expected constant growth rate of 6%, and has a dividend yield of 4%. MM...
-
Based on the income that remains after state and federal taxes are deducted. A corporation has a taxable income of $7,325,957. At this income level, the federal income rate is 53%, the state tax rate...
-
When abstracting a study, you should identify the methodological and technical strengths and weaknesses?
-
Typically, consumers put in minimum time and effort when buying products such as laundry detergent, candy, and fast food. These types of goods are classified as products. A. shopping B. specialty C....
-
The requirement that suspects are required to be informed of their most important rights, including the right against self - incrimination, before being interrogated in police custody is called the _...
-
The _ _ _ _ _ _ _ _ rule forbids the introduction in trial of any piece of evidence that has been obtained illegally. warrant exclusionary Miranda ex post facto
-
"Leadership is not about top down decisions, but it's about caring for people and their dreams." This quote comes the book Mentoring Spiritual Leaders. What are your thoughts? Does this fit into your...
-
4. The corners of the square used as centers of the four quadrants or arcs of the sectors are dra side of the square is 10 cm determine the area of the shaded portion.
-
Hardin Services Co. experienced the following events in 2016: 1. Provided services on account. 2. Collected cash for accounts receivable. 3. Attempted to collect an account and, when unsuccessful,...
-
The Wood Valley Dairy makes cheese to supply to stores in its area. The dairy can make 250 pounds of cheese per day (365 days per year), and the demand at area stores is 180 pounds per day. Each time...
-
The Hickory Cabinet and Furniture Company makes chairs. The fixed cost per month of making chairs is $7,500, and the variable cost per chair is $40. Price is related to demand, according to the...
-
The Miramar Company in Problem 18 is considering contracting with a market research firm to do a survey to determine future market conditions. The results of the survey will indicate either positive...
-
W hat is diauxic growth? Explain the roles of cAMP and CAP in this process.
-
What is antisense RNA? How does it affect the translation of a complementary mRNA?
-
What are the functions of activator proteins and repressor proteins in transcription? Explain how these proteins work at the molecular level.
Study smarter with the SolutionInn App