Comsaed Natural Products Co., Ltd. is considering to introduce a new product line to its natural products in order to attract more sales during COVID-19. Adding this new Indian cork alcohol spray, would cost the company 500,000 in new mixing machine, materials, paper work, and trainings. There is a probability of P that this new Indian cork alcohol spray will catch on (success) in the market place. The company estimates that the new product can be sold at the unit margin of 100 each. If this new product catches on, the company can generate a sales of 20,000 units and if it does not catch on (failure), the company can generate a sales of only 700 units.

The management suggests that it might be appropriate to conduct a one-day test of this new product before committing to a permanent addition to the Comsaed Natural Products. The one-day test can be completed at a cost of C and the test results can be good, neutral, or poor.

The likelihood probabilities of the test results given the success or failure of the Indian cork alcohol spray in the current market place are provided as follows:

- Given that the Indian Cork Alcohol Spray catches on, the probabilities of the test results are 0.60, 0.30, 0.10 for good, neutral, and poor.

- Given that the Indian Cork Alcohol Spray does not catches on, the probabilities of the test results are 0.20, 0.30, 0.50 good, neutral, and poor.

Using decision tree, what strategy should Comsaed Natural Products persue to maximizes it's potential profit?

Question 1 : To model this problem using decision tree, what shape of node would you use for the first node?
Select one:
a. Square Node
b. Circle Node
c. Triangle Node

Question 2 : To model this problem using decision tree with the possibility of conducting a one-day test, if c=0, what is the payoff for Comsaed Natural Products if it decides not to introduce the new Indian cork alcohol spray and it does not catche on? (Type a number - no symbols or text.)

Question 3 : To model this problem using decision tree, if p=0.5, what is the probability of the new product does not catche on (failure) given the one-day test result is neutral? (Type a number as a decimal, eg., type in 0.123 if your answer is twelve point three percent.)

Answer rating: 100% (QA)

Decision Trees DTS are a nonparametric supervised learning method used for classification and regres... View the full answer