Draw the decision tree and indicate the better plan

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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QUESTION 1
Two alternative business plans, A and B, may be under consideration, both
of uncertain outcome.
The table below shows the likely possible outcomes of plans A and B
Plan A
Plan B
Probability
Adverse
Favourable
Expected profit
Profit
£
20,000
60,000
40,000
Probability
0.5
0.5
Profit
£
Draw the decision tree and indicate the better plan
(10,000)
90,000
60,000
0.3
0.7
Transcribed Image Text:QUESTION 1 Two alternative business plans, A and B, may be under consideration, both of uncertain outcome. The table below shows the likely possible outcomes of plans A and B Plan A Plan B Probability Adverse Favourable Expected profit Profit £ 20,000 60,000 40,000 Probability 0.5 0.5 Profit £ Draw the decision tree and indicate the better plan (10,000) 90,000 60,000 0.3 0.7
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