Question: BORO RESEARCH Artex Computers is interested in developing a tape drive for a new computer but will subcontract the development to another firm. Artex has

BORO RESEARCH Artex Computers is interested in

BORO RESEARCH Artex Computers is interested in developing a tape drive for a new computer but will subcontract the development to another firm. Artex has offered $250,000 as a fee for the development and asked for bids from various research firms. The bid is to be awarded not on the basis of price (fixed at 250,000) but on the technical plan Boro Research is interested in submitting a proposal. Boro estimated that it would cost 50,000 to prepare a proposal; further, they estimated that the chances were about 50/50 that they would be awarded the contract. If he contract is awarded to Boro, there are three alternative approaches available to them in developing the tape drive. One approach involved the use of certain electronic components. the engineers estimated that it would cost 50,000 to develop a prototype of the tape dive but that there was only a 50% chance that the prototype would be satisfactory A second approach involved the use of certain magnetic apparatus. The cost of developing a prototype using this approach would be $80,000, with a 70 percent chance of success. Finally, there was a mechanical approach with a cost of $120,000, but the engineers were certain they could develop a successful prototype with this approach Boro Research would have sufficient time to try only two approaches. Thus, if either the magnetic or electronic approach were tried and it failed, the second attempt would have the use the mechanical approach in order to guarantee a successful prototype. The management of Boro Research was uncertain how to take all this information into account in making the immediate decision - whether to spend 50,000 to develop a proposal to send to Artex computers Draw a decision tree and help Boro make the decisions

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