The Disney Corporation is thinking about taking its hit Broadway musical, The Lion King on tour....

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The Disney Corporation is thinking about taking its hit Broadway musical, The Lion King on tour. It has made the following calculations The tour would cost $12 million There is a .50 chance that it will earn $20 million (high earnings) and a .5 chance it will earn $10 million (low earnings) Disney can do a preview showing of the production at some cost $P (which is currently unknown) If the audience is favorable, the show is certain to be a success and receive high earnings on tour If the audience is unfavorable, the show has only a 10% chance of receiving high earnings on the tour Based on historical data, the company believes there is a.50 likelihood that the preview audience will react favorably. a) Model this problem with a decision tree b) What is the most Disney should pay for the preview? The Disney Corporation is thinking about taking its hit Broadway musical, The Lion King on tour. It has made the following calculations The tour would cost $12 million There is a .50 chance that it will earn $20 million (high earnings) and a .5 chance it will earn $10 million (low earnings) Disney can do a preview showing of the production at some cost $P (which is currently unknown) If the audience is favorable, the show is certain to be a success and receive high earnings on tour If the audience is unfavorable, the show has only a 10% chance of receiving high earnings on the tour Based on historical data, the company believes there is a.50 likelihood that the preview audience will react favorably. a) Model this problem with a decision tree b) What is the most Disney should pay for the preview?

Answer rating: 100% (QA)

Tour cost 12 million There is a 50 chance that it will earn 20M There is a 50 chance it will ... View the full answer