Container Company ​

question 98

Essay

Container Company ​
A company must decide whether or not to change its packaging to a more environmentally safe material.The impact of the decision on profits depends on which of the following three possible scenarios develops in the future. ​ Scenario 1: The media does not focus heavily on concerns about packaging and no new laws requiring changes in packaging are passed.Under this scenario,the company will make $35 million if they change their packaging now,but will make $75 million if they do not change their packaging now. ​ Scenario 2: The media does focus heavily on concerns about packaging and no new laws requiring changes in packaging are passed.Under this scenario,the company will make $50 million if they change their packaging now,but will make $55 million if they do not change their packaging now. ​ Scenario 3: The media does focus heavily on concerns about packaging and new laws requiring changes in packaging are passed.Under this scenario,the company will make $60 million if they change their packaging now,but will make only $15 million if they do not change their packaging now. ​ The prior probabilities of the three scenarios are 0.3,0.5,and 0.2,respectively. ​ ​
-{Container Company Narrative} Set up the opportunity loss table.

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Definitions:

British Pounds

The official currency of the United Kingdom, symbolized as £.

Appreciation

An increase in the value of an asset over time.

Chinese Yuan

The official currency of the People's Republic of China, used in mainland China but not in its special administrative regions like Hong Kong.

Devalues

Reduces the value, importance, or quality of something.