A Company Looking for Venture Capitalist Funding Is Deciding on the Design

question 20

Essay

A company looking for venture capitalist funding is deciding on the design of its operating system (OS) for its new phone. The first option is to simply buy the OS from another company. This would result in sales of either 10,000 units if the market is not crowded with similar phones, or sales of only 3,000 units if the market is crowded. If the company decides to design its own OS, the phone would have sales of 70,000 units if the OS was popular, but sales of only 2,000 if the OS was a failure. Suppose that to recoup the cost of designing their own OS the company would need to sell twice as many phones as when they simply buy the OS for the profit from the scenarios to be equal. Which option should the company choose if the probability that the market is crowded is 50% and the probability that the OS is popular is 75%?

---

Definitions:

Encounter

An interaction or meeting between individuals, often used in healthcare to describe a patient's visit or consultation.

Birth

The process of giving birth; the emergence of a baby from the body of its mother.

High-risk Pregnancy

A pregnancy that poses potential complications or danger to the health of the mother, the baby, or both, requiring specialized care.

Infertility

The inability to conceive a child after a year or more of regular sexual intercourse without contraception.