McDonalds is considering introducing a new all-natural chicken sandwich. The sandwich is believed to have a 60 percent chance of being successful. A market analyst has suggested that they try out the sandwich using a test market of college students before making the introduction decision. The cost of doing the test study is approximately $300.
Past experience shows that successful products are approved in the test market 80 percent of the time, whereas unsuccessful products are approved in the test market only 25 percent of the time. If the product is successful, the net profit over the life of the product will be $900,000; if unsuccessful the net loss will be $50,000. The manager has come to you to help him decide the best course of action. The cost associated with introducing the new sandwich is estimated at $80,00