An oil drilling company is considering 2 sites for its well. The probabilities for getting a dry, a low-producing, or a high-producing well at site A are 0.6, 0.25, and 0.15, respectively. The costs for the 3 eventualities are -$300,000, $450,000, and $1,500,000. For site B, the probability of finding a dry well, resulting in a $200,000 loss, is 0.2. The company estimates that the probability of a low-producing well is 0.8, and in that case it would make $50,000. (a) Make a tree diagram for this situation and find the expected value for site A. $ (b) Make a tree diagram for this situation and find the expected value for site B.

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Chapter1: Combinatorial Analysis
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An oil drilling company is considering 2 sites for its well. The probabilities for getting a dry, a low-producing, or a high-producing well at site A are 0.6, 0.25, and 0.15, respectively. The costs for the 3 eventualities
are -$300,000, $450,000, and $1,500,000. For site B, the probability of finding a dry well, resulting in a $200,000 loss, is 0.2. The company estimates that the probability of a low-producing well is 0.8, and in
that case it would make $50,000.
(a) Make a tree diagram for this situation and find the expected value for site A.
$
(b) Make a tree diagram for this situation and find the expected value for site B.
$
Transcribed Image Text:An oil drilling company is considering 2 sites for its well. The probabilities for getting a dry, a low-producing, or a high-producing well at site A are 0.6, 0.25, and 0.15, respectively. The costs for the 3 eventualities are -$300,000, $450,000, and $1,500,000. For site B, the probability of finding a dry well, resulting in a $200,000 loss, is 0.2. The company estimates that the probability of a low-producing well is 0.8, and in that case it would make $50,000. (a) Make a tree diagram for this situation and find the expected value for site A. $ (b) Make a tree diagram for this situation and find the expected value for site B. $
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