a. What is the optimal plan of action for WakTek? What is the current expected economic value of the WakAtak project?
b. Suddenly it turns out that the original estimate of the cost of safety testing was incorrect. Analyze the sensitivity of WakTek’s optimal plan of action to the cost of safety testing.
c. Suppose WakTek also has the possibility of conducting a market survey, which would tell it exactly which demand scenario is true. This market research costs $1.5 million if done simultaneously for both demographics and $1 million if done for only one demographic. How, if at all, is your answer to part (a) affected?
d. Suppose that demand is not independent across demographics after all, but instead is perfectly correlated (i.e., if demand is high in one demographic then it is for sure high in the other one as well). How, if at all, would that change your answer to part (c)?