Explain in some detail how the PrecisionTree calculations in Figure 6.11 for the Acme problem are exactly the same as those for the hand-drawn decision tree in Figure 6.6. In other words, explain exactly how PrecisionTree gets the monetary values in the colored cells in Figure 6.11.If your answer is negative number, enter "minus" sign. Market EMVGreat ( $18 × - $ ) = $Fair ( $18 × - $ ) = $Awful ( $18 × - $ ) = $Total 0.45 × __ $ + 0.35 × ___$ + 0.20 × ___ $ = ___ $ Great600(18) – 6000 = 4800Figure 6.6Equivalent Decision0.45Tree1074Fair0.35300(18) – 6000 = -600Awful0.20Market product90(18) – 6000 =-4380-60001074Abandon product Figure 6.11Decision Tree from PrecisionTreeAB1Acme single-stage new product decision2All monetary values (except the unitmargin in cell B5) are in $1000s, and allsa les volumes are in 1000s of units.3 Inputs4 Fixed cost5 Unit margin$6,000$1867 Market8 GreatProbabilitySales volumeNet revenue600$10,800$5,4000.459 Fair10 Awful0.353000.2090$1,620111245.0%45.0%Great13$10,800$4,80014TRUESales volume$1,074Yes15-$6,0001635.0%35.0%Fair17$5,400-$6001820.0%Awful19$1,620-$4,38020Continue with product?New Product Decision21$1,07422FALSE0.0%No23$0

Answered: Great - 600(18) – 6000 = 4800 Figure…

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

Explain in some detail how the PrecisionTree calculations in Figure 6.11 for the Acme problem are exactly the same as those for the hand-drawn decision tree in Figure 6.6. In other words, explain exactly how PrecisionTree gets the monetary values in the colored cells in Figure 6.11.

If your answer is negative number, enter "minus" sign.

Market		EMV
Great		( $18 × - $ ) = $
Fair		( $18 × - $ ) = $
Awful		( $18 × - $ ) = $
Total		0.45 × __ $ + 0.35 × ___$ + 0.20 × ___ $ = ___ $

Great
600(18) – 6000 = 4800
Figure 6.6
Equivalent Decision
0.45
Tree
1074
Fair
0.35
300(18) – 6000 = -600
Awful
0.20
Market product
90(18) – 6000 =-4380
-6000
1074
Abandon product

Figure 6.11
Decision Tree from PrecisionTree
A
B
1
Acme single-stage new product decision
2
All monetary values (except the unit
margin in cell B5) are in $1000s, and all
sa les volumes are in 1000s of units.
3 Inputs
4 Fixed cost
5 Unit margin
$6,000
$18
6
7 Market
8 Great
Probability
Sales volume
Net revenue
600
$10,800
$5,400
0.45
9 Fair
10 Awful
0.35
300
0.20
90
$1,620
11
12
45.0%
45.0%
Great
13
$10,800
$4,800
14
TRUE
Sales volume
$1,074
Yes
15
-$6,000
16
35.0%
35.0%
Fair
17
$5,400
-$600
18
20.0%
Awful
19
$1,620
-$4,380
20
Continue with product?
New Product Decision
21
$1,074
22
FALSE
0.0%
No
23
$0

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