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ILB is considering the development and marketing of a new product. Development costs will be $2.8m. If the product is successful (and there is a 20% probability that this won't be the case) and it is marketed, it is estimated that there is a 30% probability of it being extremely successful and producing an expected profit of $8.6m, a 45% probability that it will be fairly successful and produce an expected profit of $2.1m and a 25% probability that it will be not be successful at all and make a loss of $3.5m. What is the expected value/pay-off from the product? A. $0.72m. B. $2.65m. C. $4.4m. D. $(0.68)m. |