(A) Draw a decision tree for this problem. (B) Using expected monetary value, which alternative should be chosen
A manager is quite concerned about the recent deterioration of a section of the roof on a building that houses her firm’s computer operations. According to her assistant there are three options which merit consideration: A, B, and C. Moreover, there are three possible future conditions that must be included in the analysis: I, which has a probability of occurrence of .5; II, which has a probability of .3; and III, which has a probability of .2.
If condition I materializes, A will cost $1500, B will cost $2000, and C will cost $1600. If condition II materializes, the costs will be $1500 for A, $1800 for B, and $1900 for C. If condition III materializes, the costs will be $1000 for A, $1600 for B, and $1900 for C.
(A) Draw a decision tree for this problem.
(B) Using expected monetary value, which alternative should be chosen
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