Please do not give solution in image format thanku 2. Kroft Food Products is attempting to decide whether it should introduce a new line of saladdressings called Special Choices. The company can test market the salad dressings in selectedgeographic areas or bypass the test market and introduce the product nationally. The cost ofthe test market is $150,000. If the company conducts the test market, it must wait to see theresults before deciding whether to introduce the salad dressings nationally. The probability ofa positive test market result is estimated to be 0.6. Alternatively, the company can decide notto conduct the test market and go ahead and make the decision to introduce the dressings ornot. If the salad dressings are introduced nationally and are a success, the company estimatesthat it will realize an annual profit of $1.6 million, whereas if the dressings fail, it will incur aloss of $700,000. The company believes the probability of success for the salad dressings is0.50 if they are introduced without the test market. If the company does conduct the testmarket and it is positive, then the probability of successfully introducing the salad dressingsincreases to 0.8. If the test market is negative and the company introduces the salad dressingsanyway, the probability of success drops to 0.30.Using decision tree analysis, determine whether the company should conduct the test market.

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Using decision tree analysis, determine whether the company should conduct the test market.

Practical Management Science

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ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

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Question

Please do not give solution in image format thanku

2. Kroft Food Products is attempting to decide whether it should introduce a new line of salad
dressings called Special Choices. The company can test market the salad dressings in selected
geographic areas or bypass the test market and introduce the product nationally. The cost of
the test market is $150,000. If the company conducts the test market, it must wait to see the
results before deciding whether to introduce the salad dressings nationally. The probability of
a positive test market result is estimated to be 0.6. Alternatively, the company can decide not
to conduct the test market and go ahead and make the decision to introduce the dressings or
not. If the salad dressings are introduced nationally and are a success, the company estimates
that it will realize an annual profit of $1.6 million, whereas if the dressings fail, it will incur a
loss of $700,000. The company believes the probability of success for the salad dressings is
0.50 if they are introduced without the test market. If the company does conduct the test
market and it is positive, then the probability of successfully introducing the salad dressings
increases to 0.8. If the test market is negative and the company introduces the salad dressings
anyway, the probability of success drops to 0.30.
Using decision tree analysis, determine whether the company should conduct the test market.

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