Baltimore Manufacturing Company Inc Baltimore Manufacturing Company Inc. has developed a promising new product.

The firms management faces choices: It can sell the new product to a company for $2 ! it can hire a consultant to study the mar"et and then ma"e a decision! or it can arrange financing for #uilding a factory and then manufacture $ mar"et the product. The study will cost Baltimore $% ! and its management #elieves that there is a#out a & '& chance that a favora#le mar"et will #e found. If the study is unfavora#le! the management figures that it can still sell the idea for $ ( ! . But even if a favora#le mar"et is found! the chance of an ultimately successful product is a#out 2 out of &. ) successful product will return $ & ! . *ven with an unfavora#le study! a successful product can #e e+pected a#out once in every ten new product introduction. If Baltimore Management decides to manufacture the product without a study! it figures there is only % in ( chances of its #eing successful. ) product failure cost $ % ! .

,ohn -ash! the C*. off Baltimore is in a dilemma and is una#le to ta"e a decision. /e approaches a management consultant from Baltimore 0niversity for /elp. )s a management consult! suggest the #est course of action to Baltimore Manufacturing Company Inc.