question archive The Miramar Company is going to introduce one of three new products: a widget, a hummer, or a nimnot

The Miramar Company is going to introduce one of three new products: a widget, a hummer, or a nimnot

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The Miramar Company is going to introduce one of three new products: a widget, a hummer, or a nimnot. The market conditins (favorable, stable, or unfavorable) will determine the prodit or loss the company realizes, as showing in the following payoff table.

 

Market Conditions

 

Favorable

Stable

Unfavorable

Product

.2

.7

.1

Widget

$120,000

$70,000

$-30,000

Hummer

60,000

40,000

20,000

Nimnot

35,000

30,000

30,000

  1. a) Computer the expected value for each decision and select the best one.
  2. b) Develop the opportunity loss table and compute the expected opportunity loss for each product.
  3. c) Determine how much the firm would be willing to pay to a market research firm to gain better information about future market conditions.

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