1. Silicon Dynamics has developed a new computer chip that will enable it to beg

Question

1. Silicon Dynamics has developed a new computer chip that will enable it to begin producing and marketing a personal computer if it so desires. Alternatively, it can sell the rights to the computer chip for $15 million. If the company chooses to build computers, the profitability of the venture depends upon the company's ability to market the computer during the first year. It has sufficient access to retail outlets that it can guarantee sales of 10,000 computers. On the other hand, if this computer catches on, the company can sell 100,000 computers. For analysis purposes, these two levels of sales are taken to be the two possible outcomes of marketing the computer. If the decision is to go ahead with producing and marketing the computer, the company will produce as many chips as it finds it will be able to sell, but not more. The cost of setting up the assembly line is $67 million. The difference between the selling price and the variable cost of each computer if $600. If the prior probabilities of the two level of sales are both 0.5, which decision alternative should be chosen?

Explanation / Answer

I believe there's mistake with the numbers you provided in the qustion.please check.As per question,I am getting profit in 10,000 sales and profit in 100,000 sales both in negative and so unable to get proper answer.please check

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