Lowe Technology Corp is evaluating the introduction of a new product. The possib
ID: 2724563 • Letter: L
Question
Lowe Technology Corp is evaluating the introduction of a new product. The possible levels of unit sales and probabilities of their occurrence are given. Compute the expected value.
Possible Market Reaction Sales in Units Probabilities
Low Response 20 .10
Moderate Response 40 .20
High Response 85 .40
Very high response 80 .30
Explanation / Answer
the formula for expected value is D= DP
where
D= sales in unit
P = probabilities
D x p = DP
20 0.10 2
40 0.20 8
85 0.40 34
80 0.30 24
D = 68
The expected value is 68 unit sale of new product
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