Super Cola Is Considering the Introduction of a New 8

Essay

Super Cola is considering the introduction of a new 8 oz.root beer.The probability that the root beer will be a success is believed to equal .6.The payoff table is as follows: $$\begin{array} { l | l c } & \text { Success } \left( s _ { 1 } \right) & \text { Failure } \left( s _ { 2 } \right) \\\hline \text { Produce } & \$ 250,000 & - \$ 300,000 \\\text { Do Not Produce } & - \$ 50,000 & - \$ 20,000\end{array}$$ Company management has determined the following utility values: $$\begin{array} { l c c c c } \text { Amount } & \$ 250,000 & - \$ 20,000 & - \$ 50,000 & - \$ 300,000 \\\hline \text { Utility } & 100 & 60 & 55 & 0\end{array}$$
a.Is the company a risk taker, risk averse, or risk neutral?
b.What is Super Cola's optimal decision?