Eagle beverages limited wants to introduce a fruit-based drink in Spain. Eagle has assets of $300 million and is looking at different alternatives to market the drink.

Alternative 1: Perform a test only in the Barcelona market area and then decide whether or not to market it nationally.

Alternative 2: Introduce the beverage nationally without running any tests.

Alternative 3: Without any testing decide not to introduce the beverage. If there is no market study, then it is believed that there is a 55% chance of success nationally.

If there is success nationally, then the assets for the company will grow by $600 million. If it fails then the assets will decrease by $200 million.

If there is a market study undertaken then the cost will be $60 million and the probability of local success in Barcelona is 60% with a 40% chance of failure. If there is success locally, then the probability of success nationally is 85%. If there is a local failure in Barcelona then the chances of national success are 10%. The company wants to maximize its success, so what should the company do?

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