Question

Question 4 A company is trying to decide whether to bid for a certain contract or not. They estimate that merely preparing the bid will cost US $10,000. If their company bid then they estimate that there is a 50% chance that their bid will be put on the "short-list", otherwise their bid will be rejected. Once "short- listed" the company will have to supply further detailed information (entailing costs estimated at US $ 5,000). After this stage their bid will either be accepted or rejected. The company estimates that its costs associated with the contract are US$127,000. They are considering three possible bid prices, namely US $155,000, US $ 170,000 and US $ 190,000. They estimate that the probability of these bids being accepted (once they have been short-listed) is 0.90, 0.75 and 0.35 respectively.

Which bid price should the company submit? Show all calculations that support your answer. What will be the profit in this case?

full working out please showing the final bid price they should submit

Answer 1

tail to rake Bal-bat o accep 490 S5 Bids pit atceptac 0.35 o 15 ahardo follouw Promalig a new whi 40-40 mrtal mc te40-40 est ma 100,000 o, 000 luova

a .kuatable -k沙