A company is considering making a new product. They estimate the probability that the new product will be successful is 0.75. If

Question

3 years ago

7

A company is considering making a new product. They estimate the probability that the new product will be successful is 0.75. If

it is successful it would generate $240,000 in profit. The cost to develop the product is $196,000. Use the revenue (profit – cost) and expected value to decide whether the company should make this new product.

Mathematics

2 answers:

tensa zangetsu [6.8K] · Answer 1 · 2022-02-07T17:31:33+03:00

tensa zangetsu [6.8K]3 years ago

8 0

<span>You take the probability of success (and the revenue generated by it) and the probability of failure (and the cost associated with trying it) and get an expected value:

aP(a) + bP(b)

I hope my answer has come to your help. God bless and have a nice day ahead!

</span>

Alik [6] · Answer 2 · 2022-02-07T19:14:00+03:00

Hello there.
<span>
A company is considering making a new product. They estimate the probability that the new product will be successful is 0.75. If it is successful it would generate $240,000 in profit. The cost to develop the product is $196,000. Use the revenue (profit – cost) and expected value to decide whether the company should make this new product.</span>

aP(a) + bP(b)