A Manager Is Quite Concerned About the Recent Deterioration of a Section

question 19

Essay

A manager is quite concerned about the recent deterioration of a section of the roof on a building that houses her firm's computer operations.According to her assistant there are three options which merit consideration: A,B,and
C.
(i)Draw a decision tree for this problem.
(ii)Using expected monetary value,which alternative should be chosen?
EMV: A = $12,500,B = $18,400,C = $16,000 so choose B
C.If condition III materializes,the costs will be $10,000 for A,$15,000 for B,and $19,000 for
C.Moreover,there are three possible future conditions that must be included in the analysis: I,which has a probability of occurrence of .5; II,which has a probability of .3; and III,which has a probability of .2.If condition I materializes,A will cost $12,000,B will cost $20,000,and C will cost $16,000.If condition II materializes,the costs will be $15,000 for A,$18,000 for B,and $14,000 for

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Definitions:

Set of Data

A collection of related information or variables, typically numeric, organized for analysis.

Mean

A statistical measure that represents the average value of a set of numbers.

Set of Data

A collection of data points or values that have been gathered to provide information for analysis.

Median

The middle value in a sorted list of numbers, which separates the higher half from the lower half of the dataset.