... marketing a microprocessor. Undertaking this project will require either purchasing a sophisticated CAD system or hiring and training several additional engineers. The market for the product could be either favorable or unfavorable. Silicon, Inc. of course has the option of not developing the new product at all. With favorable acceptance by the market sales would be 25,000 processors selling for $100 each. With unfavorable acceptance, sales would be only 8,000 processors selling for $100 each. The cost of CAD equipment is $500,000, but that of hiring and training three new engineers is only $375,000. However, manufacturing cost should drop from $50 each when manufacturing without CAD, to $40 each when manufacturing with CAD.
The probability of favorable acceptance of the new microprocessor is 40; the probability of unfavorable acceptance is 60