Decision tree

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description

Decision tree for an imaginary company which must choose between two different manufacturing processes, one being dependent on a special compound with a volatile price.

Transcript of Decision tree

Page 1: Decision tree

Decision

Process A

High Sales

Low Sales

Process B

High compound

cost

High Sales

Low Sales

Low compound

cost

High Sales

Low Sales

Decision

Process B

Low compound cost

$75M

$40M

$30M

$90M

$10M

$60M

60%

30%

70%

40%

60%

40%

60%

40%

60%

40%

42%

12%

18%

28%

$

%

Decision

Alternatives

Uncertainties

Expected Net Present Value

Probabilities in %

Decision Tree – Yoni Dayan