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Management Studies

Using PrecisionTree (Decision Tree software), what decision will OWNER make if she is an expected monetary value (EMV) maximizer? Build the decision tree in PrecisionTree:

Facts:

1. Owner is considering submitting a proposal for an electronic timing system for the 2016 Olympic Games.

2. Owner estimates the chance that they will succeed in developing the microprocessor in time to be 30%.

3. If they succeed in developing the microprocessor, there is an excellent chance that Owner's company will win the $1.5 million Olympic contract.

4. Owner estimates this chance to be 80%.

5. Owner can also submit a proposal based on an alternative, inferior timing system that has already been developed.

6. Owner estimates the chance of winning the contract with the existing system to be 10%. Owner is allowed to submit at most one proposal.

7. If Owner pursues the new microprocessor, Owner must invest $250,000 in further research and development.

8. In addition, submitting a proposal requires developing a prototype timing system at an additional cost of $50,000 (regardless of whether the technology used is new or old).

9. Finally, if Owner wins the contract, the finished product will cost an additional $200,000 to produce (again, regardless of the technology).

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91755140

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