Business, 24.02.2022 07:20 santiagoagilg

Your company has developed a new energy drink and you are trying to decide whether to sell the recipe, or make and distribute it yourself. A company will pay you $9 million for the recipe. If your company makes the drink itself, it will cost $12 million to build a factory and distribution network. Your analytics and marketing teams tell you there is a 30% chance the market response will be great, a 60% chance the market response will be decent with gross earnings of $15 million, and a 10% chance the market response will be poor with gross earnings of $5 million. If the market response is great, there is a 30% chance the drink will be the new fad and you will make gross earnings of $50 million, a 60% chance the gross earnings will be $40 million, and a 10% chance the gross earnings will be $20 million. What is the expected value from the Perfect Information Tree (just the perfect information tree, not EVPI).

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Your company has developed a new energy drink and you are trying to decide whether to sell the recip...