ABC Corporation is considering launching a new product. They have the option to conduct market research to gather more information about consumer demand for the product, but it comes at a cost of $1 million. If they decide not to conduct market research, they can choose to launch the product immediately, but there is a 40% chance of failure, which would result in a loss of $3 million. If the product is successful, it will generate a profit of $5 million. If they conduct market research, there is an 80% chance that it will show positive consumer demand and a 20% chance that it will show negative consumer demand. If the market research shows positive consumer demand, there is a 90% chance that the product will be successful, and if it shows negative consumer demand, there is only a 30% chance that the product will be successful.

What should ABC Corporation do? Provide a decision tree to illustrate the problem and calculate the expected value of each decision.

Use the formula Expected Value = Probability * Payoff to calculate the expected value of each decision.

Answer rating: 100% (QA)

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