Super Cola Is Considering the Introduction of a New 8

question 24

Essay

Super Cola is considering the introduction of a new 8 oz.root beer.The probability that the root beer will be a success is believed to equal .6.The payoff table is as follows: $$\begin{array} { l | l c } & \text { Success } \left( s _ { 1 } \right) & \text { Failure } \left( s _ { 2 } \right) \\\hline \text { Produce } & \$ 250,000 & - \$ 300,000 \\\text { Do Not Produce } & - \$ 50,000 & - \$ 20,000\end{array}$$ Company management has determined the following utility values: $$\begin{array} { l c c c c } \text { Amount } & \$ 250,000 & - \$ 20,000 & - \$ 50,000 & - \$ 300,000 \\\hline \text { Utility } & 100 & 60 & 55 & 0\end{array}$$
a.Is the company a risk taker, risk averse, or risk neutral?
b.What is Super Cola's optimal decision?

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Definitions:

Painting Red Green Blue

A reference to the RGB color model used in digital painting and screen display, where red, green, and blue light are combined in various ways to reproduce a broad array of colors.

Essential Elements

Fundamental components or aspects that are necessary for something to function or be understood.

Op Art

An artistic movement of the 1960s in which painters sought to produce optical illusions of motion and depth using only geometric forms on two-dimensional surfaces.

Pointillist Manner

A painting technique in which small, distinct dots of color are applied in patterns to form an image, associated with Post-Impressionism.