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Cleveland Cruisers, a local river-boat touring company, is considering the implementation a new hand-held cash...

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Accounting

Cleveland Cruisers, a local river-boat touring company, is considering the implementation a new hand-held cash register system for the upcoming season to handle sales and checkout. If they choose to create the new product they can use systematic or fast track development. They could also choose to forgo the new product and stick with the existing kiosk they've used for decades or simply enhance and stengthen the products in the kiosk. In the diagram below, the sales for each option are listed on the right-hand side along with the probabilities and costs.

image

What is the EMV for decision points 2A, 2B and 1? Given this values, what should Cleveland Cruisers do?

Cost = $105,000 .4 Strong $600,000 .4 Modest Systematic development 2a $40,000 .2 Weak $4,000 2A New product Cost = $40,000 .1 Strong $600,000 Fast track development .2 2b 1 Modest $40,000 .7 Weak $4,000 No new product Strengthen products .3 Strong $300,000 2B .4 Modest 2c $20,000 .3 Weak Cost = $15,000 $6,000 No change .6 Modest $20,000 2d Weak $2,000 Cost = $0

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