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Quarter 2 Flora Co intends to expand the business to include a home delivery service. The delivery van is expected to cost $20,000 and the business has a 60% chance of the new delivery service being successful. The following decision tree has been produced to represent this decision. The final profit figures in the decision tree are based upon whether demand is good or poor for the new delivery service. Expand Cost of van ($20,000) Key Don't expand Decision Outcome Success 0.6 Failure 0.4 A B Good 0.7 Poor 0.3 Good 0.2 Poor 0.8 $600,000 $100,000 $10,000 $8,000 $0

Quarter 2 Flora Co intends to expand the business to include a home delivery service. The delivery van is expected to cost $20,000 and the business has a 60% chance of the new delivery service being successful. The following decision tree has been produced to represent this decision. The final profit figures in the decision tree are based upon whether demand is good or poor for the new delivery service. Expand Cost of van ($20,000) Key Don't expand Decision Outcome Success 0.6 Failure 0.4 A B Good 0.7 Poor 0.3 Good 0.2 Poor 0.8 $600,000 $100,000 $10,000 $8,000 $0

Practical Management Science
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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Quarter 2 Flora Co intends to expand the business to include a home delivery service. The delivery van is expected to cost $20,000 and the business has a 60% chance of the new delivery service being successful. The following decision tree has been produced to represent this decision. The final profit figures in the decision tree are based upon whether demand is good or poor for the new delivery service. Expand Cost of van ($20,000) Key D Don't expand Decision Outcome Success 0.6 Failure 0.4 A B Good 0.7 Poor 0.3 Good 0.2 Poor 0.8 $600,000 $100,000 $10,000 $8,000 $0
Transcribed Image Text:Quarter 2 Flora Co intends to expand the business to include a home delivery service. The delivery van is expected to cost $20,000 and the business has a 60% chance of the new delivery service being successful. The following decision tree has been produced to represent this decision. The final profit figures in the decision tree are based upon whether demand is good or poor for the new delivery service. Expand Cost of van ($20,000) Key D Don't expand Decision Outcome Success 0.6 Failure 0.4 A B Good 0.7 Poor 0.3 Good 0.2 Poor 0.8 $600,000 $100,000 $10,000 $8,000 $0
The expected value (EV) at decision D is $253,360. Identify, by clicking on the relevant boxes in the table below, whether the statements regarding the decision tree are true or false. According to the decision tree the expansion to include a home delivery service should go ahead Flora Co can use the decision tree to identify the average outcome if the decision is repeated again and again TRUE TRUE FALSE FALSE
Transcribed Image Text:The expected value (EV) at decision D is $253,360. Identify, by clicking on the relevant boxes in the table below, whether the statements regarding the decision tree are true or false. According to the decision tree the expansion to include a home delivery service should go ahead Flora Co can use the decision tree to identify the average outcome if the decision is repeated again and again TRUE TRUE FALSE FALSE
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