Q5. The Cola Company must decide whether or not to introduce a new diet soft dri

Question

Q5. The Cola Company must decide whether or not to introduce a new diet soft drink. Management feels that if it does introduce the diet soda it will yield a profit of $1 million if sales are around 100 million, a profit of $200,000 if sales are around 50 million, or it will lose S2 million if sales are around 1 million bottles. If Cola Company does not introduce the new diet soft drink, it will suffer a loss of $400,000 if sales are around 100 million, a profit of S200,000 if sales are around 50 million, or it will lose $2 million if sales are around 1 million bottles. Construct a payoff table for this problem. (1 Mark)

Explanation / Answer

The Payoff Table for Coco cola company will be

Where the 100,50 and 1 represents the sales in million and the first column represents the case when we introduce the drink and second represent when we do not introduce the drink

100 50 1 Introduce $1,000,000 $200,000 -$2,000,000 Do Not Introduce -$400,000 -$400,000 -$400,000

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