Ware: Exhibit 3

Final advice to Ware

To: Ware R&D Committee
From: Your outside strategic consultant
Date: The day you must finally decide what to do
Re: Whether to be "in" or "out"

Based on the economic data you�ve provided me, I�ve analyzed the problem you�re facing. There�s one critical piece of information I still require: your assessment of the likelihood that National will choose to pursue this research opportunity.

Once you provide me with this assessment, my advice will be simple: If you believe the chance that National will be "in" to be greater than 63.3%, invest in the research project yourself. Hope that National ends up being "out", or that the composite process is not feasible, or that you beat National to demonstrating feasibility. Anticipate the economic consequences of this problem to be the cost of your two years of research, combined with a long-term expected loss of Pr(National is "in") * 50% * 50% * $6,030,000 (NPV).

In assessing the likelihood that National will be "in", you should certainly take into account the following information:

whether National can afford to finance the research
who within the National organization holds the ultimate responsibility of deciding whether to be "in"
that manager�s current status and track record within the National managerial hierachy
any other "incidental" information of relevance that you or others within your organization have recently come across that may be of relevance
how high you believe National might currently be assessing the likelihood that you will choose to be in this R&D race (see Exhibit 4)