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: I, II, and III. Moreover, there are three possible future conditions that must be included in the analysis: A, which has a probability of occurrence of .25; B, which has a probability of .6; and C, which has a probability of .15. If condition A materializes, I will cost $12000, II will cost $20000, and III will cost $16000. If condition B materializes, the costs will be $15000 for I, $18000 for II, and $14000 for III. If condition C materializes, the costs will be $10000 for I, $15000 for I, and $19000 for III. (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: I, II, and III. Moreover, there are three possible future conditions that must be included in the analysis: A, which has a probability of occurrence of .25; B, which has a probability of .6; and C, which has a probability of .15.
If condition A materializes, I will cost $12000, II will cost $20000, and III will cost $16000. If condition B materializes, the costs will be $15000 for I, $18000 for II, and $14000 for III. If condition C materializes, the costs will be $10000 for I, $15000 for I, and $19000 for III.
(A) Draw a decision tree for this problem.
(B) Using expected monetary value, which alternative should be chosen
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