Reference no: EM132214997

Sunset Food Products is attempting to decide whether it should introduce a new line of breakfast cereal Special Choices. The company can test market the new cereal line in selected geographic areas or bypass the test market and introduce the product nationally. The cost of the test market is $120,000. If the company conducts the test market, it must wait to see the results before deciding whether to introduce the new cereal line nationally. The probability of a positive test market result is estimated to be 0.6. Alternatively, the company can decide not to conduct the test market and go ahead and make the decision to introduce the cereal line or not. If the cereal line is introduced nationally and is a success, the company estimates that it will realize an annual profit of $1,500,000 while if the cereal line fails it will incur a loss of $600,000. The company believes the probability of success for the cereal line is 0.5 if they are introduced without the test market. If the company does conduct the test market and it is positive, then the probability of successfully introducing the cereal line increases to 0.7. If the test market is negative and the company introduces the cereal line anyways, the probability of success drops to 0.3.

Draw a complete decision tree for this problem. Clearly present all decision and event nodes, probabilities, and payoffs. (SHOW ALL WORK)