Discuss the below:
Management is considering going live with a new product that research believes is promising. Engineering estimates that if a $300,000 pilot plant is build there is a 0.75 chance of a high yield versus the alternative of a low yield. If the pilot plant shows a high yield they believe there is a probability of 0.8 that the commercial plan will also have a high yield. If the pilot plan shows a low yield, there is only a .15 chance that the commercial plant will have a high yield. The company stands to make $12,150,000 if the commercial plant has a high yield while a loss of $1,510,000 is projected if the yield is low. There is some disagreement as to whether Engineering's pilot plant will be a reliable model for the scaled up commercial plant. What is your conclusion about the value that will be obtained from the pilot plant and whether the company should even entertain the idea of going commercial at all?