1. The Sigma Company is introducing a new product. The company has carried out some market research studies and analysed the selling prices of similar types of competitive products that are currently being sold. The information suggests that a selling price of Le 18/=, Le 19/= or Le 20/= is appropriate. The company intends to hire machinery to manufacture the product at Le 200,000/= per annum, but if annual production is more than 60,000 units, then additional machinery will have to be hired at Le 80,000/= per annum. The variable cost is expected to be either Le 5/= or Le 6/= per unit produced, depending on the outcome of the negotiations with suppliers. The market research department has produced the following estimates of sales demand for each possible selling price. These estimates are based on pessimistic, most likely and optimistic forecasts, and subjective probabilities have been attached to them. The estimates are as follows: Le 18 Le 19 Le 20 Units Sold Prob Units Sold Prob Units Sold Prob Pessimistic 70,000 0.30 60,000 0.10 30,000 0.40 Most likely 80,000 0.50 70,000 0.70 60,000 0.50 Optimistic 90,000 0.20 90,000 0.20 70,000 0.10 The probabilities for the unit variable cost are 0.60 for the variable cost of Le 5/= per unit and 0.40 for the variable cost of Le 6/= per unit. The company has also committed itself to an advertising contract of Le 40,000/= per annum. You are required to: a. Draw a decision tree b. At which price should the company charge?