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identified three potential market opportunities : England , France , and Germany . If you enter the English market , you have a 0.5 chance of a big success ( selling 100,000 units at a per-unit profit of $ 8 ), a 0.3 chance of moderate success ( selling 60,000 units at a per-unit profit of $ 6 ), and a 0 , 2 chance of failure ( selling nothing ). If you enter the German market , you have a 0.2 chance of huge success ( selling 150,000 units at a per-unit profit of $ 10 ), a 0.5 chance of moderate success ( selling 70,000 units at a per-unit profit of $ 6 ), and a 0.3 chance of failure ( selling nothing ). If you can enter only one market , and the cost of entering the market ( regardless of which market you select ) is $ 250,000 , should you enter one of the European markets ? If so , which one ? If you enter , what is your expected profit ?
Individual Problem 17-4 : Your company has a customer who is shutting down a production line , and it is your responsibility to dispose of the extrusion machine . The company could keep it in inventory for possible future product and estimates that the reservation value of $ 250,000 . Your dealings on the second-hand market lead you to believe that these is a 0.4 chance a random buyer will pay $ 300,000 a 0.25 chance the buyer will pay $ 350,000 , a 0.1 chance the buyer will pay $ 400,000 , and a 0.25 chance it will not sell . If you must commit to a posted price , what prices maximizes profit ?
Froeb et al .’ s Chapter 19 :
identified three potential market opportunities : England , France , and Germany . If you enter the English market , you have a 0.5 chance of a big success ( selling 100,000 units at a per-unit profit of $ 8 ), a 0.3 chance of moderate success ( selling 60,000 units at a per-unit profit of $ 6 ), and a 0 , 2 chance of failure ( selling nothing ). If you enter the German market , you have a 0.2 chance of huge success ( selling 150,000 units at a per-unit profit of $ 10 ), a 0.5 chance of moderate success ( selling 70,000 units at a per-unit profit of $ 6 ), and a 0.3 chance of failure ( selling nothing ). If you can enter only one market , and the cost of entering the market ( regardless of which market you select ) is $ 250,000 , should you enter one of the European markets ? If so , which one ? If you enter , what is your expected profit ?
Individual Problem 17-4 : Your company has a customer who is shutting down a production line , and it is your responsibility to dispose of the extrusion machine . The company could keep it in inventory for possible future product and estimates that the reservation value of $ 250,000 . Your dealings on the second-hand market lead you to believe that these is a 0.4 chance a random buyer will pay $ 300,000 a 0.25 chance the buyer will pay $ 350,000 , a 0.1 chance the buyer will pay $ 400,000 , and a 0.25 chance it will not sell . If you must commit to a posted price , what prices maximizes profit ?