Scenario A Company Must Decide Whether or Not to Change Its

question 29

Short Answer

Scenario
A company must decide whether or not to change its packaging now to a more environmentally safe material.The impact of the decision on profits depends on which future scenario develops.Scenario 1 is that 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 $30 million if they change their packaging now,but will make $70 million if they do not change their packaging now.Scenario 2 is that 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 $45 million if they change their packaging now,but will make $50 million if they do not change their packaging now.Scenario 3 is that 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 $55 million if they change their packaging now,but will make only $10 million if they do not change their packaging now.The probabilities of the three scenarios are 0.3,0.5,and 0.2,respectively.
-What is the most the company should be willing to pay for a research study designed to reduce its uncertainty about media and legal developments concerning packaging?
____________________ million

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Definitions:

Frontier

The edge of a settled area, or the boundary between the known and unknown, often associated with westward expansion in American history.

Railroads

Systems of tracks along which trains run, a major form of transportation for both goods and passengers, historically significant in the development and expansion of countries.

Development

The process of economic growth, expansion, or realization of social and cultural potential within a country or region.

Railroad Industry

The sector of the economy focused on the construction, operation, and maintenance of railways for the transport of goods and passengers.