1.

SUCCESS
₱ 200, 000 - ₱ 10, 000
P= 0.80
AWARDED A CONTRACT C.
P= 0.50 146,400

PREPARE A BID B.
FAILURE - ₱ 18, 000 - ₱ 10, 000
68,200
Cost: - ₱10,000
P= 0.20
NOT AWARDED
A A CONTRACT
-₱ 10, 000
P= 0.50
NOT PREPARE A BID
0

SOLUTION:

C.
EV = 0.80 (₱ 200, 000 - ₱ 10, 000) + 0.20 (- ₱ 18, 000 - ₱ 10, 000)

EV = 0.80 (₱ 190, 000) + 0.20 (-28,000)

EV = 152, 000 + (-5,600)

EV =146, 400

B.

EV = 0.50 (146,400) + 0.50 (-10, 000)

EV = 73,200 + (-5,000)

EV = 68, 200

A. Final alternatives are 68, 200 or 0.

DECISION: The engineer should prepare the bid despite having no advantage and disadvantage in its
contract awarding. Moreover, whatever action, the cost will be paid. So, might as well lean on the
probability of success since it is also high.
2.

SUCCESS ₱ 800,000 – 60,000 – 75,000

P= 0.65

ELECTRONIC C.
385,000
Cost: - ₱60,000

FAILURE
PURCHASE
P= 0.35 - ₱ 60, 000 – 75,000
PATENT
B
Cost: - ₱75,000 SUCCESS
₱ 800,000 – 40,000 – 75,000
P= 0.75
A MANUAL D.
Cost: - ₱40,000 485,000
NOT PURCHASE
0
FAILURE
- ₱ 40, 000 – 75,000
P= 0.25

C. ELECTRONIC

EV = 0.65 (₱ 800,000 – 60,000 – 75,000) + 0.35 (- ₱ 60, 000 – 75,000)

EV = 0.65 (665,000) + 0.35 (-135,000)

EV = 432,250 + (-47,250)

EV = 385, 000

D. MANUAL

EV = 0.75 (₱ 800,000 – 40,000 – 75,000) + 0.25 (- ₱ 40, 000 – 75,000)

EV = 0.75 (685,000) + 0.25 (-115,000)

EV = 513, 750 + (-28, 750)

EV = 485,000

B. Choices are:
Electronic System = 385,000
Manual System = 485,000
Therefore, the best choice is the Manual system.

A. Purchase a patent.

FINAL DECISION: The company should purchase the patent and the best system in developing new products would
be the manual system since it is cheaper, and it will result to a higher amount of income left after deducting all the
costs.
3.
SUCCESS
8,000,000-120,000-12,000
P= 0.80
METHOD A
6, 268,000
Cost: - ₱ 120,000
FAILURE
-120,000-12,000
P= 0.20
SUCCESS
8,000,000- 50,000-12,000
P= 0.60
RECEIVE CONTRACT METHOD B
6, 268,000 4, 738,000
P= 0.50 Cost: - ₱ 50,000
SUBMIT A FAILURE
-50,000-12,000
PROPOSAL B. P= 0.40
Cost: - ₱ 12,000 SUCCESS
3,128,000 8,000,000-30,000-12,000
P= 0.45
A METHOD C
3, 558,000
Cost: - ₱ 30,000
NOT SUBMIT FAILURE
0 NOT RECEIVE -30,000-12,000
-12,000 P= 0.55
P= 0.50

METHOD A
B.
EV = 0.80 (8,000,000-120,000-12,000) + 0.20 (-120,000-12,000)
EV = 0.80 (7,868,000) + 0.20 (-132,000) EV = 0.50 (6,268,000) + 0.50 (-12,000)
EV = 6,294,400 + (-26,400)
EV = 3,134,000 + (-6,000)
EV= 6, 268,000
EV = 3, 128, 000
METHOD B
EV = 0.60 (8,000,000- 50,000-12,000) + 0.40 (-50,000-12,000)
EV = 0.60 (7, 938, 0000) + 0.40 (-62,000)
A.
EV = 4, 762, 800 + (-24,800)
EV = 4, 738,000 Final alternatives are 3, 128,000 or 0.

METHOD C
EV = 0.45 (8,000,000-30,000-12,000) + 0.55 (-30,000-12,000)

EV = 0.45 (7,958,000) + 0.55 (-42,000)

EV = 3, 581, 100 + (-23,100)

EV = 3, 558,000

Decsision: The ILY Company should prepare the proposal despite the 50/50 chance of receiving the contract
because if it succeeds, the company can cover up all the cost and would have a great profit.
4.

SUCCESS
8,000,000- 120,000-12,000
P= 0.80
METHOD A
6, 248,000
Cost: - ₱ 120,000
FAILURE
-100,000-120,000-12,000
P= 0.20
SUCCESS
8,000,000- 50,000-12,000
P= 0.60
RECEIVE CONTRACT METHOD B
4, 698, 000
P= 0.50
6, 248,000
Cost: - ₱ 50,000
SUBMIT A FAILURE
-100,000-50,000-12,000
PROPOSAL P= 0.40
Cost: - ₱ 12,000 3, 118, 000 SUCCESS
8,000,000-30,000-12,000
P= 0.45
A METHOD C
3, 503, 000
Cost: - ₱ 30,000
NOT SUBMIT FAILURE
0 NOT RECEIVE -100,000-30,000-12,000
-12,000 P= 0.55
P= 0.50

METHOD A
EV = 0.80 (8,000,000-120,000-12,000) + 0.20 (-100,000-120,000-12,000)
B.
EV = 0.80 (7, 868,000) + 0.20 (-232,000)
EV = 6, 294, 400 + (-46, 400) EV = 0.50 (6,248,000) + 0.50 (-12,000)
EV = 6, 248,000
EV = 3, 124, 000 + (-6,000)
METHOD B
EV = 0.60 (8,000,000- 50,000-12,000) + 0.40 (-100,000 -50,000-12,000) EV = 3, 118, 000
EV = 0.60 (7, 938,000) + 0.4 (-162,000)
EV = 4, 762,800 + (- 64, 800)
EV = 4, 698, 000

METHOD C
EV = 0.45 (8,000,000-30,000-12,000) + 0.55 (-100,000 -30,000-12,000)
EV = 0.45 (7, 958, 000) + 0.55 (-142,000)
EV = 3, 581, 100 + (-78, 100)
EV = 3, 503, 000

Decision: Despite having the penalty if the company fails to develop the product, there is still an
advantage if the company would submit the proposal. It is because there is high probability of success in
the method A that would eventually give them great profit after deducting all the costs.
5.

SUCCESS
1,000,000 -50,0000
P= 0.75
FAVORABLE
P= 0.60
E. 575,000
WITH TESTING FAILURE
C. 125,000 -500,000 -50,0000
P= 0.25
Cost: - ₱ 50,000

UNFAVORABLE
-500,000 -50,0000
MAKE NEW P= 0.40
FACE POWDER
400,000

A SUCCESS
1,000,000
P= 0.60
NOT MAKE NEW WITHOUT TESTING
D. 400,000
FACE POWDER
0

FAILURE -500,000
P= 0.40

E. D.
EV = 0.75 (1,000,000 -50,0000) + 0.25 (-500,000 -50,0000) EV = 0.60 (1,000,000) + 0.40 (-500,000)
EV = 0.75 (950,000) + 0.25 (-550,000)
EV = 600,000 + (-200,000)
EV = 712,500 + (-137,500)
EV = 400,000
EV = 575,000

C.

EV = 0.60 (575,000) + 0.40 (-550,000)

EV = 345,000 + (-220,000)

EV = 125,000

Decision: Avon Cosmetics should make a new face powder but eliminate the consumer testing program. With this approach, they will gain
greater amount and wouldn’t pay the testing fee.
6.

GET SICK
-200
P= 0.40
REPORT FOR
WORK -80

A NOT GET SICK

0
P= 0.60
STAY HOME &
REST
-120

B.

EV = 0.40 (-200) + 0.60 (0)

EV = -80

Decision: Myra should report for work despite not feeling because she will lose lesser amount of money
rather than being deducted bigger amount of money from her salary. Moreover, there is still a greater
probability that she will not get sick.
7.

SUCCESS
660,000
COOLING P= 0.35
CRYSTALS
88,000
FAILURE
-220,000
P= 0.65
SUCCESS
WITH 220,000
P= 0.35
FLOURIDE
A 19,800
FAILURE -88,000
LAUNCH P= 0.65
NOTHING
0

B.

EV = 0.35 (660,000) + 0.65 (-220,000) Decision: The market analyst of

Colgate should choose to launch
EV = 231,000 + (-143,000)
Colgate with colling crystals. Both
EV = 88,000 choices have the same probability of
success but the colling crystals would
arrive to a bigger amount of profit
C. which is PHP 88,000.

EV = 0.35 (220,000) + 0.65 (-88,000)

EV = 77,000 + (-57, 200)

EV= 19, 800

8.

PASS
34,000
P= 0.80
RESIGN
27,200
A FAIL
0
NOT RESIGN P= 0.20
17, 000

Decision: Mighty should resign from

B. his present position and apply for the
EV = 0.80 (34,000) + 0.20 (0) job that offers twice. He has a high
probability of passing the qualifying
EV = 27,200 test and surely be paid rather than
not taking the risk of resigning and
being paid less.