You are deciding between two alternatives to build a facility between two different locations based on the estimated profitability it will generate the first year minus the investment cost. Building in location A will cost $1.1M and there is a 30% chance the workforce will generate $1M in profit, 50% chance it will generate $1.2M in profit and 20% chance it will generate $1.4M in profit. Location B will cost $1.7M and there is a 35% chance the workforce will generate $1.3M in profit, a 40% chance it will generate $1.7M in profit and a 25% it will generate $1.9M in profit. What decision will you recommend based on a decision tree analysis of these alternatives?
You are deciding between two alternatives to build a facility between two different locations based on the estimated profitability it will generate the first year minus the investment cost. Building in location A will cost $1.1M and there is a 30% chance the workforce will generate $1M in profit, 50% chance it will generate $1.2M in profit and 20% chance it will generate $1.4M in profit. Location B will cost $1.7M and there is a 35% chance the workforce will generate $1.3M in profit, a 40% chance it will generate $1.7M in profit and a 25% it will generate $1.9M in profit. What decision will you recommend based on a decision tree analysis of these alternatives?
There are two possible locations, location A and location B.
There are 3 possible events to generate profit.
Net profit = Expected profit - Cost
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