Question: QUESTION 3 [ 2 0 MARKS ] Bamba - Zonke Limited has had a hard time for the last couple of years in the market

QUESTION 3[20MARKS] Bamba-Zonke Limited has had a hard time for the last couple of years in the market in which they operate. The management must now decide whether a new factory should be built and how the factory should be. The managing director suggests that the company should first carry out market research on the success or otherwise of the product to be produced. The following information is available: P (favorable selling conditions)=0.55 P (unfavorable selling conditions)=0.55 P (market research favorable| favorable selling conditions)=0.75 P (market research | unfavorable selling conditions)=0.8 A large factory with favorable selling conditions is estimated to realize a profit of $300 million while it will make a loss of $200 million under unfavorable selling conditions. In addition, it is estimated that a small factory will make a profit of $200 million if selling conditions are favorable and a loss of $120 million under unfavorable selling conditions. The cost of carrying out market research will amount to $10 million and it is not taken into account in the calculation of the profit or loss. i. What amount will Bamba-Zonke be willing to pay for perfect information? (10 marks) ii. Analyse the decision problem using a decision tree diagram. (10 marks

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