HW_1_ProblemSet

HW_1_ProblemSet - AEM424 Homework#1 1.SoftwareMarketing

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AEM 424 Homework #1 1. Software Marketing You have developed a popular piece of business software that runs on the Windows platform. You recognize that the Linux platform is growing in popularity and have developed a version of the program to run on Linux. That development cost you $2 million, money that you have already spent. To sell the Linux version, however, you also must do a marketing campaign, which will cost $1 million. You aren't sure, however, whether Linux will be successful as a platform for business users. If it is, you will sell a lot of copies of your program for Linux (for a profit of $6m after production and distribution expenses, not counting development or marketing). If not, you will sell very few copies (for a profit of $500,000 after production and distribution expenses, not counting development or marketing). You estimate the probability of Linux succeeding at 0.7. a. A consultant says that she can do a study of the market and tell you with certainty whether or not Linux will succeed as a business platform. She can do this study before you make your investment in marketing the software for Linux. How much is it worth to you to know whether Linux will succeed before you have to make the marketing decision? Draw a decision tree as part of your answer. 2. VC Decision Tree
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This homework help was uploaded on 02/20/2009 for the course AEM 4240 taught by Professor Blalock,g. during the Spring '07 term at Cornell.

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HW_1_ProblemSet - AEM424 Homework#1 1.SoftwareMarketing

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