Lab 3 AP Austin Peay State University CLARKSVILLE TENNESSEE College of Business Decision Trees MGT 5055 Decision trees provide a graphical representation of decision alternatives, uncertain events, and their respective outcomes. They can be particularly useful for sequential decision problems. Learning material: Please watch this video Scenario: A farmer is deciding whether to plant Corn or Wheat in his field for the upcoming season. The yield and hence revenue from each crop will depend on the weather, which can either be Sunny or Rainy. Data: Revenues in USD (based on weather conditions): Crop Corn Wheat Weather Probabilities: • Sunny: 0.6 • Rainy: 0.4 Assignment Steps: 1. Draw the Decision Tree: Sunny Rainy 8,000 4,000 6,000 5,000 • Start with a decision node for the crop choice. • Branch out to the two potential weather outcomes for each crop choice. 2. Calculate Expected Monetary Values (EMVs): For each crop, use the provided probabilities and revenues to calculate the EMV. EMV = (Revenue in Sunnyx Probability of Sunny) + (Revenue in Rainy x Probability of Rainy) First Question Second Question 3. Make the Decision: Third Question What is the EMV for Corn? (5 points) What is the EVM for Wheat? (5 points) Which crop the farmer should plant? (5 points)
Lab 3 AP Austin Peay State University CLARKSVILLE TENNESSEE College of Business Decision Trees MGT 5055 Decision trees provide a graphical representation of decision alternatives, uncertain events, and their respective outcomes. They can be particularly useful for sequential decision problems. Learning material: Please watch this video Scenario: A farmer is deciding whether to plant Corn or Wheat in his field for the upcoming season. The yield and hence revenue from each crop will depend on the weather, which can either be Sunny or Rainy. Data: Revenues in USD (based on weather conditions): Crop Corn Wheat Weather Probabilities: • Sunny: 0.6 • Rainy: 0.4 Assignment Steps: 1. Draw the Decision Tree: Sunny Rainy 8,000 4,000 6,000 5,000 • Start with a decision node for the crop choice. • Branch out to the two potential weather outcomes for each crop choice. 2. Calculate Expected Monetary Values (EMVs): For each crop, use the provided probabilities and revenues to calculate the EMV. EMV = (Revenue in Sunnyx Probability of Sunny) + (Revenue in Rainy x Probability of Rainy) First Question Second Question 3. Make the Decision: Third Question What is the EMV for Corn? (5 points) What is the EVM for Wheat? (5 points) Which crop the farmer should plant? (5 points)
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Question
Transcribed Image Text:Lab 3
AP Austin Peay
State University
CLARKSVILLE TENNESSEE
College of Business
Decision Trees
MGT 5055
Decision trees provide a graphical representation of decision alternatives, uncertain events, and their
respective outcomes. They can be particularly useful for sequential decision problems.
Learning material: Please watch this video
Scenario:
A farmer is deciding whether to plant Corn or Wheat in his field for the upcoming season. The yield and
hence revenue from each crop will depend on the weather, which can either be Sunny or Rainy.
Data:
Revenues in USD (based on weather conditions):
Crop
Corn
Wheat
Weather Probabilities:
•
Sunny: 0.6
•
Rainy: 0.4
Assignment Steps:
1. Draw the Decision Tree:
Sunny
Rainy
8,000
4,000
6,000
5,000
•
Start with a decision node for the crop choice.
•
Branch out to the two potential weather outcomes for each crop choice.
2. Calculate Expected Monetary Values (EMVs):
For each crop, use the provided probabilities and revenues to calculate the EMV. EMV =
(Revenue in Sunnyx Probability of Sunny) + (Revenue in Rainy x Probability of Rainy)
First Question
Second Question
3. Make the Decision:
Third Question
What is the EMV for Corn? (5 points)
What is the EVM for Wheat? (5 points)
Which crop the farmer should plant? (5 points)
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