DMOU AssignmentCase Study : Blake ElectronicsSubmitted by: Group 3 Section A Sarthak Mukkar(12IB-041)Sourab Dang(12FN-133)Sameer Doda(12DM-126)Anirvaan Ghosh(12DM-022)Dharma Teja Surbhi(12FN-043)Jency

Mary John(12DM065)Tripti Bansal(12FN-146) (1) MAIs proposal directly gives Steve the conditional probabilities he needs (e.g., probability of a successful venture given a favorable survey). Although the information from Iverstine and Kinard (I&K) is different, we can easily use Bayes theorem to on I&K information to compute the revisedprobabilities (see file P8-Blake.XLS, sheet Posterior ). As such, does not need any additionalinformation from I&K.(2) Steves problem involves three decisions. First, should he contract the services of an outsideresearch agency? Second, if a survey is warranted, should he employ MAI or I&K? Third, in anycase, should the new product line be introduced? The TreePlan solution for Steves problem is shown in file P8 -Blake.XLS.If Steve decides not to conduct a survey, the decision is to introduce the product with an EMV of $700,000 [= (0.6)($1,500,000) + (0.4)(-$500,000)].If Steve decides to conduct the survey, he has to choose between MAI and I&K. If he chooses MAIfor the survey, the best choice is to introduce the product irrespective of whether the survey resultsare favorable or unfavorable. The EMV is $800,000 if the survey results are favorable, while theEMV is only $200,000 if the survey results are unfavorable. The overall EMV of hiring MAI is$500,000 [= (0.5)($800,000) + (0.5)($200,000)].If Steve chooses I&K for the survey, the best choice is to introduce the product if survey results arefavorable, for an EMV of $940,000. On the other hand, if the survey results are unfavorable, the bestdecision is to not introduce the product for an EMV of -$300,000 (the cost of the survey). The overallEMV of hiring MAI is $468,800 [= (0.62)($940,000) + (0.38)(-$300,000)].Comparing these alternatives, Steve should not hire either firm to do the survey. He should simplychoose to introduce the produce right away for an EMV of $700,000.
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