The owner of the Sliding By Ski Slopes in southern Pennsylvania mountains is trying to decide whether or not to rent snow-making equipment for coming winter season. He has lived in area and operated the ski resort for only the past four winters.
There're three rental equipment options: 1) rent none; 2) rent enough to give snow for about 30% of the trails; and 3) rent enough to offer snow for about 60% of the trails. He has projected profits for each of such alternatives under three conditions: little snow, average snow, and heavy snow. The data is included in following table.
Projected Profits
|
Alternative Actions
|
State
|
|
|
Little snow
|
Average snow
|
Heavy snow
|
|
No Rental
|
$-200,000
|
$200,000
|
$600,000
|
|
30% trails open
|
$-100,000
|
$200,000
|
$500,000
|
|
60% trails open
|
$100,000
|
$200,000
|
$400,000
|
Determining which alternative action to select depends on how much snow to expect this winter. The owner employs his experience to estimate the probabilities: of the last 4 years in the region, one had light snow, two had average snow, and one had heavy snow.
Make the corresponding decision tree and make recommendations.