Quantitative Management Practice Assessment -
Scenario - You are to undertake a study to find out whether the company Clean & Brite needs to market a new brand of toothpaste.
Case Study - A product manager at Clean & Brite (C&B) wants to determine whether her company should market a new brand of toothpaste. If this new product succeeds in the marketplace, C&B estimates that it could earn $1,800,000 in future profits from the sale of the new toothpaste. If this new product fails, however, the company expects that it could lose approximately $750,000. If C&B chooses not to market this new brand, the product manager believes that there would be little, if any, impact on the profits earned through sales of C&B's other products. The manager has estimated that the new toothpaste brand will succeed with probability p = 0.35. Before making her decision regarding this toothpaste product, the manager can spend $130,000 on a market research study. Based on similar studies with past products, C&B believes that the study will predict a successful product, given that the product would actually be a success, with probability 0.8. It also believes that the study will predict a failure, given that the product would actually be a failure, with probability 0.7
a. To maximise expected profit, what strategy should the C&B product manager follow?
b. Calculate and interpret EVI for this decision problem with p = 0.35. Then use a data table to find EVI for p from 0.05 to 0.70 in increments of 0.05, and chart EVI versus p.
c. Using the analysis from part b, find the EVSI when p = 0.15. T
d. Calculate and interpret the EVPI when p = 0.35.
ASSIGNMENT TASKS -
Construct a spreadsheet model with decision tree.
Develop a solution for C&B, and write your recommendation in the form of a report.
Attachment:- Assignment Files.rar