Quantitative Analysis Task 5
Quantitative Analysis Task 5
Competency 309.3.3: Expected Value Decision Analysis
Task
A. Expected Value for each decision
Develop New Product
Decision Brach 1 – Develop Thoroughly
EV if Market reaction is good= $500.000(0, 4)= $200.000
EV if Market reaction is moderate= $25.000(0, 4)= $10.00
EV if Market reaction is poor= $1.000(0,2)=$200
Total EMV=$200.000+$10.000+200= $210.20
Decision Brach 2 – Develop Rapidly
EV if Market reaction is good= $500.000(0, 1)= $50.00
EV if Market reaction is moderate: $25.000(0, 2)=$5.00
EV if Market reaction is poor: $1.000(0,7)=$7.00
Total EMV= $50.00+$5.00+7.00=$55.700
Consolidate Existing Product
Decision Brach 3 – Strengthen Product
EV if Market reaction is good: $200.000(0, 3)=$60.000
EV if Market reaction is moderate: $10.000(0, 4)=$4.000
EV if Market reaction is poor: $3.000(0,3)=$900
Total EMV= $64.900
Decision Brach 4 – Reap Without Investing
EV if Market reaction is good:$10.000(0, 6)=$6.000
EV if Market reaction is moderate: $1.000(0, 4)=$400
Total EMV= $6.400
B. Most Favorable Total EMV
The decision alternative that has the most favorable Total Expected Value is to Develop New Product- Decision Brach 1 – Develop Thoroughly
This conclusion is made after analyzing the answer given above (task A). The objective of the company is to maximize profits therefore we compare the four EMV and chose the one with the highest value or the most favorable. It is taking into consideration the probability of the market reaction, and the highest predicted gain.
Most Favorable Total EMV=
Competency 309.3.3: Expected Value Decision Analysis
Task
A. Expected Value for each decision
Develop New Product
Decision Brach 1 – Develop Thoroughly
EV if Market reaction is good= $500.000(0, 4)= $200.000
EV if Market reaction is moderate= $25.000(0, 4)= $10.00
EV if Market reaction is poor= $1.000(0,2)=$200
Total EMV=$200.000+$10.000+200= $210.20
Decision Brach 2 – Develop Rapidly
EV if Market reaction is good= $500.000(0, 1)= $50.00
EV if Market reaction is moderate: $25.000(0, 2)=$5.00
EV if Market reaction is poor: $1.000(0,7)=$7.00
Total EMV= $50.00+$5.00+7.00=$55.700
Consolidate Existing Product
Decision Brach 3 – Strengthen Product
EV if Market reaction is good: $200.000(0, 3)=$60.000
EV if Market reaction is moderate: $10.000(0, 4)=$4.000
EV if Market reaction is poor: $3.000(0,3)=$900
Total EMV= $64.900
Decision Brach 4 – Reap Without Investing
EV if Market reaction is good:$10.000(0, 6)=$6.000
EV if Market reaction is moderate: $1.000(0, 4)=$400
Total EMV= $6.400
B. Most Favorable Total EMV
The decision alternative that has the most favorable Total Expected Value is to Develop New Product- Decision Brach 1 – Develop Thoroughly
This conclusion is made after analyzing the answer given above (task A). The objective of the company is to maximize profits therefore we compare the four EMV and chose the one with the highest value or the most favorable. It is taking into consideration the probability of the market reaction, and the highest predicted gain.
Most Favorable Total EMV=