Statistical methods with financial applications, Advanced Statistics

The marketing manager of Handy Foods Ltd. is concerned with the sales appeal of one of the company's present label for one of its products. Market research indicates that supermarket consumers ?nd little appeal in the drab, somewhat cluttered appearance of the label. The company hired a design artist who produced some prototype labels, one of which was chosen consistently as best by the marketing executives. Nevertheless, the marketing executive is still in some doubt as to whether the new label would appreciably bene?t sales. He decides to make further enquiries about the consequences of a decision to switch to a new label. The decision to change to a new label is denoted by D1 and to keep the old by D2.

First he considers the costs associated with converting his company's machinery, inventory, point of purchase displays, etc., to the new label, and estimates that an out-of-pocket, once and for all cost of £250,000 would be involved. If the new label were really superior to the old, the marketing executive estimates that the present value of all net cash ?ows over and above this cost related to increased sales generated over the next three years by the more attractive label will be £400,000. Based on his prior experience and the discussion held with his colleagues, he is only willing to assign a 0.5 probability to the outcome 'new label superior to old', denoted B1. Let B2 denote the event that 'new label is not superior to the old'. Rather than make his decision on these data alone, however, he could delay it and obtain further market research information. The survey is such that it is 'perfect' at a cost of £150,000. The information from the market research survey is shown as either positive (R) or negative (  R) in favour of the new label. Draw a decision tree and decide whether it is worth carrying out market research.

Posted Date: 3/19/2013 3:58:15 AM | Location : United States







Related Discussions:- Statistical methods with financial applications, Assignment Help, Ask Question on Statistical methods with financial applications, Get Answer, Expert's Help, Statistical methods with financial applications Discussions

Write discussion on Statistical methods with financial applications
Your posts are moderated
Related Questions
Attitude scaling : The process of analysing the positions of the individuals on scales purporting to measure attitudes, for instance a liberal-conservative scale, ora risk-willingn

The skewness is a measure of asymmetry and as it is positive at 4.29, it is greater than zero which reveals that the tail extends to the right indicating the distribution to be mor

Multivariate analysis of variance is the procedure for testing equality of the mean vectors of more than two populations for the multivariate response variable. The method is dire

The procedures for extracting the pattern in a series of observations when this is obscured by the noise. Basically any such technique or method separates the original series into

VIF is the abbreviation of variance inflation factor which is a measure of the amount of multicollinearity that exists in a set of multiple regression variables. *The VIF value

Regression discontinuity design is the quasi-experimental design in which participants in, for instance, an intervention study, are assigned to the treatment and control groups on

Network sampling is a sampling design in which the simple random sample or strati?ed sample of the sampling units is made and all observational units which are linked to any of th

The Null Hypothesis - H0: There is no autocorrelation The Alternative Hypothesis - H1: There is at least first order autocorrelation Rejection Criteria: Reject H0 if LBQ1 >

what is pdf,mean & variance for multimodal distribution?

Missing values : The observations missing from the set of data for some of the reason. In longitudinal studies, for instance, they might occur because subjects drop out of the stud