Market will respond to the new product

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Reference no: EM1313212

Q. Zingtronics Corp has completed the design of a new - Graphic display for the computer systems also is about to decide on whether it should produce one of the major components internally or subcontract it to another firm. The Advisability of which action to take depends on Explain how the market will respond to the new product. If demand is high, then it's worthwhile to make the extra investment for special facilities also equipment needed to produce the component internally. For Low demand, it is preferable to sub-contract. the analyst assigned to study the problem has produced the subsequent information on costs (in thousands of dollars) also probability estimates of future demand for next 5-year period:

Future Demand
Action Low Average High

Produce $140 $120 $90
Subcontract $100 $110 $160
Probability 0.10 0.60 0.30

a) Prepare a decision tree which state the structure of the problem

b) Select the best action on the basis of the initial probability estimates for future demand.

c) Conclude the expected cost with Perfect Information (i.e. Knowing Future demand Exactly)

Reference no: EM1313212

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