Your company is planning on opening an office in Japan. Profits depend on how fast the economy in Japan recovers from its current recession. There is a 50% chance of recovery this year. You are trying to decide whether to open the office now or in a year. Construct the decision tree that shows the choices you have to open the office either today or one year from now.
To draw: The decision tree.
Introduction:
Decision tree is a tree-like graph which helps to identify strategies which are most likely to achieve goals. A decision tree comprises decision support tools.
Explanation of Solution
Given information:
A company is planning on opening an office in Japan. Company profit depends on Japanʼs economyʼs recovery from its current recession. The chance of recovery from recession is 50.00%.
Possible decision:
Possible decision in the decision tree:
- 1. To open office
- 2. To not open office
If to open office, then two possible decisions:
- 1. Economy recover
- 2. Economy doesn’t recover
If to not open office, then two possible decisions:
- 1. Economy recover
- 2. Economy doesn’t recover
If to not open office and economy recover, then two possible decisions:
- 1. To open office
- 2. To not open office
If to not open office and the economy does not recover, then two possible decisions:
- 1. To open office
- 2. To not open office
Diagram from decision tree:
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