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A Manufacturing Company must make a decision regarding the level of sales and dedication to...

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Finance

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A Manufacturing Company must make a decision regarding the level of sales and dedication to a new product. There are 2 possible decisions to be evaluated. The potential Profit from each decision alternative depends on the market acceptance which may be high, medium or low. If market acceptance is high, each of the two decision alternatives, di and d2, will yield a profit of 380 and 290. If it is medium, the payoffs are 350 and 130 thousand dollars respectively. If the demand turns out to be low, then the profits will be 120 and 90 thousand dollars respectively. The prior probability estimates of demand to be high, medium and low are 0.7.0.1 and 0.2 respectively. The company first needs to decide whether to run the market research study to obtain more accurate information regarding the future demand levels or not. . Graph the decision tree and place the probabilities and payoffs on it (10 points) P(low F) = 0.25 P(medium F) = 0.2 P(High F) = 0.55 P(F) = 0.75 P(High) = 0.7 P(medium) = 0.1 P(Low) = 0.2 P(low U)=0.45 P(medium U)=0.4 P(High U) - 0.15 P(U) = 0.25

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