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Sara Chang Problem

Sarah Chang owns a small electronics company that has developed a new microprocessor that could give it an advantage in winning a $1 million contract to provide an electronic timing system for a major sporting event. However, progress on the microprocessor has been slow and Chang is unsure if her development team can finish it in the six months before a proposal is due. To continue development of the microprocessor and make a proposal, Chang must invest $200,000 in research and an additional $50,000 to develop a prototype, but if successful she could gain the contract and earn $150,000 in profit.

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342 views1 page

Sara Chang Problem

Sarah Chang owns a small electronics company that has developed a new microprocessor that could give it an advantage in winning a $1 million contract to provide an electronic timing system for a major sporting event. However, progress on the microprocessor has been slow and Chang is unsure if her development team can finish it in the six months before a proposal is due. To continue development of the microprocessor and make a proposal, Chang must invest $200,000 in research and an additional $50,000 to develop a prototype, but if successful she could gain the contract and earn $150,000 in profit.

Uploaded by

rahulb88
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Sarah Chang's Dilemma

Sarah Chang is the owner of a small electronics company. In six months, a proposal is
due for an electronic timing system for a major sporting event. For several years,
Chang's company has been developing a new microprocessor, a critical component
in the timing system that would be superior to any product in the market. However,
progress in research has been slow, and Chang is unsure whether her development
team can produce the microprocessor in time. If they succeed, then Chang's compa-
ny has an excellent chance of winning the $1 million contract for the timing system.
If they do not, then Chang's company would have to fall back on the current micro-
processor that they have, and chances of winning the contract would be slim.

If she continues the project, then Chang must immediately invest $200,000 in re-
search and development. In addition, making a proposal requires developing a pro-
totype timing system at an additional cost of $50,000. Finally if Chang wins the con-
tract, then the finished product will need an additional $150,000 to produce.

Should Chang invest money in research and development?

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