Using the data in the decision tree, calculate the net gain for the marketing campaign - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Question 1
Using the data in the decision tree, calculate the net gain for the marketing campaign. State your answer to two decimal places. You are advised to show your working... show full transcript
Worked Solution & Example Answer:Using the data in the decision tree, calculate the net gain for the marketing campaign - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Step 1
Marketing campaign cost calculation
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Answer
The total cost for the marketing campaign can be calculated based on the probabilities and the initial costs.
The marketing campaign has a 60% chance of a gain from a £3 million market. Therefore, the expected value from this scenario is:
0.6×3 million=£1.8 million
Step 2
Marketing campaign initial cost calculation
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Answer
The initial cost for the marketing campaign is £50,000. To calculate the expected cost, we consider the 40% probability of a loss:
0.4×£50,000=£20,000
Step 3
Net gain calculation
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Answer
Now, we can calculate the net gain by subtracting the expected initial cost from the expected value:
Net Gain=£1.8 million−£20,000=£1.78 million
In terms of millions, this is approximately £1.42 million when rounded to two decimal places.
