Decision Trees Velco Construction Corporation is trying to decide whether to bid for a certain contract or not for CTU. Preparing the bid will cost Php 10,000 and there is a 50% chance that their bid will be put on the "wait-list"," otherwise their bid will be rejected. When "wait-listed" Velco Engineering Department requires additional costs of Php 5,000 so as to supply further detailed information to CTU. After this phase, their bid will be accepted or rejected. Velco approximates that the labor and material costs associated with the contract are Php 127,000. Velco offered three possible bid prices, namely Php 155,000; Php 170,000; and Php 190,000. Velco estimate that the probability of these bids being accepted (once they have been short-listed) is 0.90, 0.75, and 0.35 respectively. What should the Velco do and what is the expected value of your suggested course of action?

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Author:Amos Gilat
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Decision Trees
Velco Construction Corporation is trying to decide whether to bid for a
certain contract or not for CTU. Preparing the bid will cost Php 10,000 and
there is a 50% chance that their bid will be put on the "wait-list","
otherwise their bid will be rejected. When "wait-listed" Velco Engineering
Department requires additional costs of Php 5,000 so as to supply further
detailed information to CTU. After this phase, their bid will be accepted
or rejected. Velco approximates that the labor and material costs
associated with the contract are Php 127,000. Velco offered three possible
bid prices, namely Php 155,000; Php 170,000; and Php 190,000. Velco
estimate that the probability of these bids being accepted (once they have
been short-listed) is 0.90, 0.75, and 0.35 respectively. What should the
Velco do and what is the expected value of your suggested course of
action?
Transcribed Image Text:Decision Trees Velco Construction Corporation is trying to decide whether to bid for a certain contract or not for CTU. Preparing the bid will cost Php 10,000 and there is a 50% chance that their bid will be put on the "wait-list"," otherwise their bid will be rejected. When "wait-listed" Velco Engineering Department requires additional costs of Php 5,000 so as to supply further detailed information to CTU. After this phase, their bid will be accepted or rejected. Velco approximates that the labor and material costs associated with the contract are Php 127,000. Velco offered three possible bid prices, namely Php 155,000; Php 170,000; and Php 190,000. Velco estimate that the probability of these bids being accepted (once they have been short-listed) is 0.90, 0.75, and 0.35 respectively. What should the Velco do and what is the expected value of your suggested course of action?
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