Nomo is a start-up company that is interested to produce dairy-free products. Nomo has limited investment...

 

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Nomo is a start-up company that is interested to produce dairy-free products. Nomo has limited investment to start and is considering whether to initially produce a dairy-free milk or a dairy-free ice cream. It can only produce one product. The sales demand for both products is uncertain so Nomo has estimated data regarding possible sales demand and has produced the following probability distribution of the profits for each product: Dairy-free milk Outcome (profits) Estimated probability €6 000 0,1 €12 000 0,4 €16 000 0,5 Dairy-free ice cream Outcome (profits) Estimated probability €4 000 0,2 €14 000 0,6 €24 000 0,2 Required 1. EVALUATE which product (dairy-free milk or dairy-free ice cream) Nomo should produce based on its probability distributions. Show your workings. 2. EXPLAIN whether the probabilities used in the probability distributions are objective or subjective probabilities. 3. EXPLAIN the advantage for Nomo's management to use probability distributions instead of single point estimates in evaluating which product to produce. Nomo is a start-up company that is interested to produce dairy-free products. Nomo has limited investment to start and is considering whether to initially produce a dairy-free milk or a dairy-free ice cream. It can only produce one product. The sales demand for both products is uncertain so Nomo has estimated data regarding possible sales demand and has produced the following probability distribution of the profits for each product: Dairy-free milk Outcome (profits) Estimated probability €6 000 0,1 €12 000 0,4 €16 000 0,5 Dairy-free ice cream Outcome (profits) Estimated probability €4 000 0,2 €14 000 0,6 €24 000 0,2 Required 1. EVALUATE which product (dairy-free milk or dairy-free ice cream) Nomo should produce based on its probability distributions. Show your workings. 2. EXPLAIN whether the probabilities used in the probability distributions are objective or subjective probabilities. 3. EXPLAIN the advantage for Nomo's management to use probability distributions instead of single point estimates in evaluating which product to produce.

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Answer 1 Dairy Free milk Outcome Profits Estd Probability Expected profit 6000 01 600 ... View the full answer