Answer to Question #42698 in Finance for sandile

Question

A small company has developed a new product for the electronics industry. The company believes that an advertising campaign costing R2000 would give the product a 70% chance of success. It estimates that a product with this advertising support would provide a return of R11000 if successful and return of R2000 if it not successful. Past experience suggests that without advertising support a new product of this kind would have a 50% chance of success giving a return of R10000 if successful and a return of R1500 if not successful. Construct a decision tree and write a report advising the company on its best course of action.