What should the television company do

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A television company has an option on a new six-part series. They could sell the rights to this series to the network for £100,000 or they could make the series themselves. If they make the series themselves, advertising profit from each episode is not known exactly but could be £15,000 (with a probability of 0.25), £24,000 (with a probability of 0.45) or £29,000, depending on the success of the series. A local production company can make a pilot for the series. For a cost of £30,000 they will give either a favourable or an unfavourable report on the chances of the series being a success. The reliability of their report (phrased in terms of the probability of a favourable report, given the likely advertising profit etc.) is given in the following table. What should the television company do?

Reference no: EM131407511

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