2. Renesmee Corporation is a chemical company. The research and development mana

Question

2. Renesmee Corporation is a chemical company. The research and development manager is trying to decide whether or not to develop a new solvent that would work at all conditions. It is thought that the solvent project may be a major success with an estimated value of $ 500,000, a moderate success with an estimated value of $200,000 since it can be sold to another company to help with its current project or a total failure. If the project is a failure it will cost the company $450,000.Based on the subjective judgment of the manager, the following probabilities are assigned to the three possibilities. P( major success) = 0.40 P( moderate success) = 0.30 P( failure) = 0.30 a) Construct a decision tree for this problem. What is the optimal decision strategy and its expected value? b) What is the expected value of perfect information? Explain what it means.

Explanation / Answer

similar problem is at below link. See if this can help you. Please rate if helpful. Good luck buddy. . . . . . . . http://www.cob.sjsu.edu/yetimy_m/Decision Tree Problems.htm

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