Soft drink consultants, “Soft Drink Consultants” is a

Soft drink consultants

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Reference no: EM132182848

Diet Coke is contemplating introduction of a new energy drink. The company estimates that in case they produce the new energy drink it will yield a profit of $1,000,000 if sales turn out to be around 100,000,000 bottles, a profit of $200,000 if sales turn out to be 50,000,000 bottles, or they will lose $2,000,000 if sales turn out to be around 1,000,000 bottles. If Diet Coke doesn’t produce the new energy drinks, they will suffer a loss of $400,000.

a. Explain in details and provide the appropriate arguments if Diet Coke introduce the new energy drink by using:

I. a conservative approach

II. an optimistic approach

III. the middle of the road (MaxiMin Regret) approach

b. An internal study by the management estimates that the probability of selling 100,000,000 bottles is 0.3333, the probability of selling 50,000,000 bottles is 0.50, the probability of selling 1,000,000 bottles is 0.1667. Should they introduce the new diet drink? Why? Explain in details.

c. “Soft Drink Consultants” is a company that provides a tailor-made feasibility study for a consulting fee of $275,000. Should Diet Coke hire them to conduct such study? Why? Explain.

Reference no: EM132182848

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