Reference no: EM133020373

Decision-making techniques assignment:

Techware Incorporated is considering the introduction of two new software products to the market. The company has four options regarding these products: introduce neither product, introduce product 1 only, introduce product 2 only, or introduce both products. Research and development costs for products 1 and 2 are $180,000 and $150,000, respectively. Note that the first option entails no costs because research and development efforts have not yet begun. The success of these software products depends on the national economy in the coming year. The company's revenues, depending on its decision and the state of the economy, are given in the file P06_33.xlsx. The probabilities of a strong, fair, or weak economy in the coming year are assessed to be 0.30, 0.50, and 0.20, respectively.

a. Identify the strategy that maximizes Techware's expected net revenue.

b. Perform a sensitivity analysis on the optimal decision, letting each of the inputs vary one at a time plus or minus 25% from its base value, and summarize your findings. Which of the inputs appears to have the largest effect on the best solution?