Probabilities are assigned to the three possibilities

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Reference no: EM131578475

Chemco Corporation is a chemical company. The research and development manager is trying to decide whether or not to develop a new solvent that would work at all conditions. It is thought that the solvent project may be a major success with an estimated value of $1,500,000, a moderate success with an estimated value of $800,000 since it can be sold to another company to help with its current project, or a total failure. If the project is a failure, it will cost the company $700,000. Based on the subjective judgment of the manager, the following probabilities are assigned to the three possibilities. Support your final decision by finding the largest EMV, draw the decision tree and place all numbers in the correct place.

P(major success) = 0.20

P(moderate success) = 0.40

P(failure) = 0.40

Reference no: EM131578475

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