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Task QAT1 5 Task A: Develop New Product 1.) Develop Thoroughly= \$210,200 2.) Develop Rapidly= \$55,700 Consolidate Existing Product 3.) Strengthen Products= \$64,900 4.) Reap Without Investing= \$6,400 Task B: 1. Decision 1 has the highest expected value (\$210,200) of all four branches, making it the favorable decision. To find expected values for each decision, first you multiply the Payoffs by the Probability for each States of Nature (in this case Good, Moderate, and Poor). Then, you add the totals of each Market Reaction and that becomes the expected value for each decision alternative. The highest expected value from all the decisions generally is the most favorable decision. The calculations for the expected values of each of the four decisions as followed: The formula is: EV= Predicted Gain Decision 1: (develop thoroughly) Good- 500,000(.4) = 200,000 Moderate- 25,000(.4) = 10,000 Poor-1,000(.2) = 200 Total-\$210,200 Decision 2: (develop rapidly) Good- 500,000(.1) = 50,000 Moderate- 25,000(.2) = 5,000 Poor-1,000(.7) = 700 Total- \$55,700 Decision 3: (strengthen products) Good- 200,000(.3) = 60,000 Moderate- 10,000(.4) = 4,000 Poor- 3,000(.3) = 900 Total- \$64,900 Decision 4: (reap without investing) Moderate- 10,000(.6) = 6,000 Poor- 1,000(.4) = 400 Total- \$6,400 ... View Full Document

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