Annual market demand information (milions of De mand Inte rce Demand Low (Az) Al

Question

Annual market demand information (milions of De mand Inte rce Demand Low (Az) Alpha Cus tomer MultiBlend Potpuri MyMavim Me dium (A) High (A) Slope (B) 10 20 16 0.4 0.2 0.4 Cost information (per pound) Alpha Cus tomer Production Cost Additional Cost Salvage Value MultiBlend 1.00 0.65 0.25 1.00 0.0S 0.25 Pricing Alpha Cus to MultiBlend mer Low Price, High Price 3.00 MMavim $2.00 S2.50 Demand Equation AL-Bx p with probability 0.4 Annual Demand =AM-BA p with probability 0.2 H-Bxp with probability 0.4 where p-pz or pH Example MultiBlend demand with a low-price decision: 6-2 x 2.50-1 with probability 0.4 8-2% 2.50-3 with probability 0.2 10-2x 2.50-5 with probability 04 Annual Demand =

Explanation / Answer

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D Slope low high DSLow DSHigh 6 8 10 2 2.5 3 5 6 12 16 20 5 1.5 2 7.5 10 8 12 16 2.75 2 2.5 5.5 6.875

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