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decide whether to launch a new product or not.

The management of a business has to decide whether to launch a new product or not. If

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the product is launched there are two elements of uncertainty:

● There is a 0.7 probability that sales will be 8,000 units per month but a 0.3 probability that

sales will be 5,000 units per month.

● If sales are 8,000 units per month, there is a 0.5 probability that the contribution per unit

will be £2 and a 0.5 probability that it will be negative _ £(1). If sales are 5,000 units per

month there is a 0.6 probability that the contribution per unit will be £3 and a 0.4 probability

that it will be £1.

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