Reference no: EM131929670
Question: Jim Sellers is thinking about producing a new type of electric razor for men. If the market is good, he would get a return of $140,000, but if the market for this new type of razor is poor, he would lose $84,000. Because Ron Bush is a close friend of Jim Sellers, Jim is considering the possibility of using Bush Marketing Research to gather additional information about the market for the razor. Ron has suggested two options to Jim. The first alternative is a sophisticated questionnaire that would be administered to a test market. It will cost $5,000. The second alternative is to run a pilot study. This would involve producing a limited number of the new razors and trying to sell them in two cities that are typical of American cities. The pilot study is more accurate but is also more expensive. It will cost $20,000. Ron has suggested that it would be a good idea for Jim to conduct either the questionnaire or the pilot before making the decision concerning whether to produce the new razor. But Jim is not sure if the value of either option is worth the cost.
For the sake of solving this problem, assume that Jim has the following probability estimates available: the probability of a successful market without performing the questionnaire or pilot study is 0.5, the probability of a successful market given a positive questionnaire result is 0.78, the probability of a successful market given a negative questionnaire result is 0.27, the probability of a successful market given a positive pilot study result is 0.89, and the probability of a successful market given a negative pilot study result is 0.18. Further, the probability of a positive questionnaire result is 0.45 and the probability of a positive pilot study result is also 0.45.
(a) Draw the decision tree for this problem and identify the best decision for Jim.
(b) What is the value of the questionnaire's information? What is its efficiency?
(c) What is the value of the pilot study's information? What is its efficiency?
How cohesiveness and diversity support group effectiveness
: Explain how cohesiveness and diversity support group effectiveness? Provide examples of cohesiveness and diversity in a group from your own group experience.
|
What is the discounted payback period
: An investment project costs $23798 and has annual cash flows of $6354 for six years. What is the discounted payback period
|
What is the expected return on the portfolio
: If the expected returns on these stocks are 8 percent and 11 percent, respectively, what is the expected return on the portfolio?
|
What was the holding period return for the stock
: A stock has had returns of 17.82 percent, 12.42 percent, 6.51 percent, 28.18 percent, and -14.04 percent over the past five years, respectively.
|
What is the value of the questionnaire information
: Jim Sellers is thinking about producing a new type of electric razor for men. If the market is good, he would get a return of $140,000.
|
What is the arithmetic average return
: What is the arithmetic average return on her stock if she sells it five years from today? (show as percent and round to 2 decimal places)
|
What strategy would you recommend
: Assuming that Jason will stay in the house for 5 years, each 0.5% increase in the interest rate of his mortgage will cost him $2,400. Each 0.5% decrease.
|
Explain importance of business impact analysis activities
: Explain the importance of business impact analysis activities when an organization is trying to determine the breadth of its contingency planning activities.
|
What is the speculator profit
: a. If the spot at expiration is $0.069/Peso, what is the speculator's profit?
|