Create a decision tree and calculate the expected value

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Create a decision tree using the information given

You need to make a decision on adding new products to ABC. Situation: You are considering marketing a new product. Product A or Product B. The market research shows that the products have the probability of .3 for rejection, .4 for acceptance and .3 for dominance. Product A cost $20,000, so it would lose that amount if it was rejected; if it is accepted it could profit $300,000; and if it dominated it would profit $400,000. Product B cost $30,000, so it would lose that amount if it were rejected; if it is accepted it could profit $400,000; and if it dominated it could profit $600,000. Create a decision tree and calculate the expected value. What is your choice of Product A or B?

Reference no: EM131235173

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