Quantitative Assignment      •  Using the information below develop a decision tree to      determine the best course of action for ABC Beverage.  Using the      results of the Decision Analysis prepare a short paper outlining      the best plan of action and justifying your decision.  Your short      paper should incorporate the elements of Hammond, et al.'s PrOACT      URL framework.      One member of your team will submit in Blackboard a properly and      completely labeled decision tree (all costs, revenues,      probabilities, decision nodes, and calculations will be included)      and your short paper as a Word document.      ABC Beverage, Inc. develops, processes, and markets mixes to be      used in nonalcoholic cocktails and mixed drinks for home      consumption. Mrs. Lee, who is in charge of research and      development at ABC, Inc., this morning notified Mr. Dick Jones,      the president, that exciting developments in the research and      development section indicate that a new beverage, an instant pina      colada, should be possible because of a new way to process and      preserve coconut. Mrs. Lee is recommending a major program to      develop the pina colada. She estimates that expenditure on the      development may be as much as $100,000 and that as much as a      year's work may be required. In the discussion with Mr. Jones,      she indicated that she thought the possibility of her outstanding      people successfully developing such a drink now that she'd done      all the really important work was in the neighborhood of 90      percent. She also felt that the likelihood of a competing company      developing a similar product in 12 months was 80 percent.      Mr. Jones is strictly a bottom line guy and is concerned about      the sales volume of such a beverage. Consequently, Mr. Jones      talked to Mr. Besnette, his market research manager, whose      specialty is new product evaluation, and was advised that a      market existed for an instant pina colada, but was some-what      dependent on acceptance by both grocery stores and retail liquor      stores. Mr. Besnette also indicated that the sales reports      indicate that other firms are considering a line of tropical      drinks. If other firms should develop a competing beverage the      market would, of course, be split among them. Mr. Jones pressed      Mr. Besnette to make future sales estimates for various      possibilities and to indicate the present (discounted value of      future profits) value. Mr. Besnette provided Table 1.      Mr. Besnette's figures did not include (1) cost of research and      development, (2) cost of new production equipment, or (3) cost of      introducing the pina colada. The cost of the new production      equipment is expected to be $ 100,000 because of the special way      the coconut needs to be handled, and the cost of introducing the      new product is expected to be about $150,000 because of the      point-of purchase displays that would be necessary to introduce      the new product.      Mrs. Lee has indicated that she does have alternative development      proposals, which are:      1. A reduced research program to see someone else comes out with      the product first and if not, then proceed with a crash program.      The reduced program for the first eight months would cost $10,000      per month. One advantage of this is that if the effort was      unsuccessful, then development costs would be held to the      eight-month figure (8 months × $ 10,000 = $80,000). The      likelihood of success under this approach is the same as the more      orderly development. (The likelihood of a competing company      developing a product in 8 months is 60 percent.) The crash      development program would take place in months 9 through 12 and      would cost an additional $60,000. It would proceed only if the      eight-month study guaranteed successful product development      (acceptance of a successfully developed product would follow the      probabilities given in Table 1).      2. Use a reduced research program and maintain an awareness of      industry developments to see if someone else develops a product.      If someone else has developed a product at the end of six months,      it would cost only an additional $30,000 to analyze their product      and duplicate it. The reduced development program would cost      $10,000 per month.      Mr. Besnette, being the great marketer that he is, is of course      reluctant to be second on the market with a new product. He says      that the first product on the market will usually obtain a      greater share of the market, and it will be difficult to win      those customers back. Consequently, he indicates that only about      50 percent of the sales that he indicated in Table 1 could be      expected if ABC waited until competing brands were already on the      market. Moreover, he suspects that there is only a 50/50 chance      that the competitor will be out with a product within the next      six months.      There are three options: (1) orderly development of the pina      colada, (2) modest development effort followed by the crash      program, or (3) a modest development effort for the first six      months to see if a competitive product comes on the market.      TABLE 1 Sales and Profit Potentials      Consumer Acceptance        (Sales Potential) Probability Present      Values     (Discounted Value of Lifetime Profits)      Substantial        0.10    $800,000      Moderate   0.60    $600,000      Low                0.30    $500,000