Happy Jack wants to capitalize on the health craze that is gaining momentum

in the United States and introduce a new line of nutritious salads.

Happy Jack is particularly cautious in launching new products and typically

performs an extensive consumer acceptance test in several metropolitan areas

before launching a new food product such as a salad line.

Occasionally the company will take new food products directly to market

without a consumer acceptance test, especially when the costs to do the

consumer acceptance test are not warranted. The costs of such a test are

usually about $2 million in total.

The probability of a successful product launch is 0.70 when Happy Jack's

consumer acceptance test results indicate that consumers like the product, and

0.20 when they have little to no interest in the product.

When Happy Jack goes to market without a consumer acceptance test, the

likelihood of a successful product launch is 0.25. Usually about 30 percent of

products put through a consumer acceptance test are successful, according to

historical data. To help Happy Jack make decisions on new product launches,

they have created a new business analysis team.

The supervisor of this new group, Harry Seitz, decides to assign you to this

new product opportunity. Conducting a preliminary analysis, Harry concludes

that the value to the Happy Jack, should the new salad line be successful, is

approximately $25 Million over the life of the product.

If the line is not successful, the company will likely lose $5 Million. This $5

Million would be in addition to the $2 Million for any consumer acceptance

test. All product development costs are considered "sunk costs" and are not

included in these calculations of product success or loss. Harry outlines the

specific tasks that he wants you to complete. These specific tasks are outlined

in Week 10 Assignment Sheet.