The Nitro Fertilizer Company is developing a new fertilizer. If Nitro markets the product and it is successful, the company will earn a $50,000 profit; if it is unsuccessful, the company will lose $35,000. In the past, similar products have been successful 60% of the time. At a cost of $5,000, the effectiveness of the new fertilizer can be tested. If the test result is favorable, there is an 80% chance that the fertilizer will be successful. If the test result is unfavorable, there is only a 30% chance that the fertilizer will be successful. There is a 60% chance of a favorable test result and a 40% chance of an unfavorable test result. Determine Nitro’s optimal strategy. Also find EVSI and EVPI.
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