USING DATA TREE FROM DADM IN EXCEL

A product manager at Clean & Brite (C&B) wants to determine whether her company should market a new brand of toothpaste. If this new product succeeds in the marketplace, C&B estimates that it could earn $1,800,000 in future profits from the sale of the new toothpaste. If this new product fails, however, the company expects that it could lose approximately $750,000. If C&B chooses not to market this new brand, the product manager believes that there would be little, if any, impact on the profits earned through sales of C&Bs other products.

The manager has estimated that the new toothpaste brand will succeed with probability 0.50. Before making her decision regarding this toothpaste product, the manager can spend $75,000 on a market research study. Based on similar studies with past products, C&B believes that the study will predict a successful product, given that product would actually be a success, with probability 0.75. It also believes that the study will predict a failure, given that the product would actually be a failure, with probability 0.65.

Part 2: Value of Perfect Information

First, we want to know what is the most that any information about the success or failure of the product could be worth. In other words, if we could get a perfectly accurate prediction of product success or failure, at no cost, what would that be worth? (Questions to answer are down below)

What is the value of a test that would predict the correct success or failure outcome of the product with 100% accuracy?

For this question, calculate the value of perfect information and ignore any cost to acquire the information.

Enter your answer in dollars, rounded to the dollar.

If the market study's prediction is 100% accurate, should they pay $75,000 for the information? (yes/no)