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
Hypothesis testing is a  general term for procedure of assessing whether the sample data is consistent or otherwise with statements made about the population. It basically tells u

Odds ratio is the ratio of the odds for the binary variable in two groups of the subjects, such as, males and females. If the two possible states of variable are labeled as 'succe

The non-trivial extraction of implicit, earlier unknown and potentially useful information from data, specifically high-dimensional data, using pattern recognition, artificial inte

Correlation matrix : A square, symmetric matrix with the rows and columns corresponding to the variables, in which the non diagonal elements are correlations between the pairs of t

Length-biased sampling : The bias which arises in the sampling scheme based on the visits of patient, when some individuals are more likely to be chosen than others simply because

sales per day for a product are as follows: x= 10, 11, 12, 13 (p)= 0.2, 0.4, 0.3, 0.1 obtain mean and variance of daily sale. if the profit is described by the following equation p

This term is sometimes used for the data collected in those longitudinal studies in which more than the single response variable is recorded for each subject on each occasion. For

when there is tie in sequencing then what we do

sfdgfdg

1)  Consider an antenna with a pattern: G(θ,φ) = sinn(θ/θ0) cos(θ/θ0)   where θ0 = Π/1.5 (a) What is the 3-dB bandwidth? (b) What is the 10-dB beam width? (c) What is t