The Icebox Breakfast Foods Company is considering marketing a new breakfast cereal. If the new cereal ssuccessful, it will mean a USD 10 million profit (present value) over the life of the product. If unsuccessful,.USD 2 million, loss on investment will be incurred. Management currently feels there is a 50-50 chance ththe product will be successful.Two market research firms have approached Icebox with proposals to obtain more information. EG Surveycollects data on consumer attitudes with respect to specific characteristics of a product, such as sweetnescaloric content, nutritive value, etc., and produces a forecast of "success" or "fail". Of the studies thiscompany has performed on similar products recently, their experience has been as follows:EG SurveysForecastActual OutcomeSuccessFailureSuccess20Failure20A second company, Liquid Company Inc.; performs analysis in an entirely different, independent manner.This company performs extensive analysis on competitive products and produce a recommendation of"success" or "failure" based on the anticipated amount and quality of competitive products. Theirexperience with 50 studies has been as follows:Liquid Company ExperienceForecastActual OutcomeSuccessFailureSuccess223Failure25EG Surveys charges USD 100,000 per survey, while Liquid Company charges USD 150,000.a. Consider only EG Surveys. Use a decision tree to decide whether Breezy should purchase this survey.b. Consider only Liquid Company, Inc. Use a decision tree to decide whether Breezy should purchase thissurvey.

The expected monetary value of an investment decision refers to the value of return one can expect…

Answered: The Icebox Breakfast Foods Company is…

Marketing

20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter6: Target Markets: Segmentation And Evaluation

Section: Chapter Questions

Problem 17DRQ: Under what conditions might a firm use multiple forecasting methods?

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