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
Greenhouse geissercorrection is the method of adjusting the degrees of freedom of the within- subject F-tests in the analysis of the variance of longitudinal data so as to allow t

HOW TO CONSTRUCT A BIVARIATE FREQUENCY DISTRIBUTION

Minimization is the method or technique for allocating patients to the treatments in clinical trials which is usually the acceptable alternative to random allocation. The procedur

Probit analysis  is the technique most commonly employed in the bioassay, specifically toxicological experiments where the group of animals is subjected to known levels of a toxin

A family of the probability distributions of the form given as   here θ is the parameter and a, b, c, d are the known functions. It includes the gamma distribution, normal dis

Bayes factor : A summary of evidence for the modelM1 against the another modelM0 provided by the set of data D, which can be used in the model selection. Given by the ratio of post

I need a statistics project done. How much will it cost?

Mean squarederror is the expected value of square of the difference between an estimator and the true value of the parameter. If the estimator is unbiased then the mean of the squ

Chain-binomial models : Models arising in mathematical theory of the quite infectious diseases, which postulate that at any stage in the epidemic there are a certain number of the

Tree is the term from the branch of the mathematics which known as the graph theory, used to describe any set of the straight-line segments joining the pairs of points in some pro