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A Company Must Decide Whether or Not to Change Its

Question 111

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A company must decide whether or not to change its packaging to a more environmentally safe material.The impact of the decision on profits depends on which of the following three possible scenarios develops in the future.
Scenario 1:
The media does not focus heavily on concerns about packaging and no new laws requiring changes in packaging are passed.Under this scenario,the company will make $35 million if they change their packaging now,but will make $75 million if they do not change their packaging now.
Scenario 2:
The media does focus heavily on concerns about packaging and no new laws requiring changes in packaging are passed.Under this scenario,the company will make $50 million if they change their packaging now,but will make $55 million if they do not change their packaging now.
Scenario 3:
The media does focus heavily on concerns about packaging and new laws requiring changes in packaging are passed.Under this scenario,the company will make $60 million if they change their packaging now,but will make only $15 million if they do not change their packaging now.
The prior probabilities of the three scenarios are 0.3,0.5,and 0.2,respectively.What is the most the company should be willing to pay for a research study designed to reduce its uncertainty about media and legal developments concerning packaging?

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