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(Solution) - The manager of Zentronics Corp must decide whether to initiate

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The manager of Zentronics Corp. must decide whether to initiate an advertising campaign for the firm's newest multimedia computer chip. There has been some discussion among division managers about the chip's market condition. The marketing department assesses the probability of having "strong market" to be 0.3. The manager, with the help of the marketing staff, has estimated the profits she believes the firm could earn, as follows:
Problem Information
Profits with advertising:
Strong market........................................................
22000000
Weak market........................................................
8000000
Profits without advertising:
Strong market........................................................
15000000
Weak market........................................................
10000000
Prob. of "Strong" Market =..........................................
0.3
Prob. of "Weak" market =..........................................
0.7
Requirements
1. Should the firm undertake the advertising campaign? Why or why not?
2. What is the probability level regarding the state of the market that will render the manager indifferent as to the courses of
action?
3. What is the maximum amount the firm should pay to obtain perfect information regarding the state of the market?

 







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This question was answered on: Jul 11, 2017

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