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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 calculation
Answer
To calculate the net gain from the marketing campaign, we first need to determine the expected value of the campaign:
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The probability of gaining £3 million is 60%, so:
Expected Gain = 0.6 \times £3,000,000 = £1,800,000
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The probability of losing £50,000 is 40%, so:
Expected Loss = 0.4 \times £50,000 = £20,000
Thus, the expected value of the marketing campaign is:
Expected Value = £1,800,000 - £20,000 = £1,780,000
Step 2
Calculate net gain
Answer
Finally, we calculate the net gain by subtracting the initial cost:
Net Gain = Expected Value - Initial Cost
For this case, assuming the initial cost was not stated, we proceed as follows:
Net Gain = £1,780,000.
So, rounding to two decimal places, the net gain amounts to £1,780,000.