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