Question: Question 3 Silicon Dynamics has developed a new computer chip that will enable it to begin producing and marketing a personal computer if it so

Question 3 Silicon Dynamics has developed a new

Question 3 Silicon Dynamics has developed a new computer chip that will enable it to begin producing and marketing a personal computer if it so desires. Alternatively, it can sell the rights to the computer chip for $15 million. If the company chooses to build computers, the profitability of the venture depends on the company's ability to market the computer during the first year. It has sufficient access to retail outlets that it can guarantee sales of 10,000 computers. On the other hand, if this computer catches on, the company can sell 100,000 units. For analysis purposes, these two levels of sales are taken to be the only two possible outcomes of marketing the computer, but it is unclear what their probabilities are. The cost of setting up the assembly line is $6 million (as a fixed cost). The difference between the selling price and the variable cost of each computer is $600 (that is, the unit profit before taking consideration of the fixed cost is $600). Develop a decision tree using nodes and arrows to determine the minimum level of the probability for the high level of sales (that is, 100,000 units of computers) so that the company would like to choose to product and market the product on its own

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