week 2 discussion 2

Prior to beginning work on this forum, read Chapter 6 of your text, and review and reflect on Sections 6-1, 6-2, 6-3, 6-4, 6-5, and 6-6. Also, review the webpage Using Decision Trees in Finance Links to an external site..

Please read the Example 6.1, “New Product Decisions at ACME” in the course text. Next, assume you are CEO of the ACME company. You must decide whether to market a new product. The product is currently part way through the development process, and some fixed development costs have already been occurred.

In your initial post, using the completed Example 6.1, “New Product Decisions at ACME,” apply each of the Elements of Decision Analysis (Section 6-2), and explain how they apply to Example 6.1. Basically, what you are doing is interpreting Example 6.1 and applying it to the elements of decision analysis.

Use the following elements of decision analysis subheadings as you compose your post:

Problem identification

Possible decisions

Possible outcomes

Probabilities of outcomes

Payoffs and Costs

Decision Criterion

Create a decision tree illustrating the elements of decision analysis

Refer to Figures 6.5 and 6.6.