Excel, In Class Problem, Decision Trees Solution

Excel, In Class Problem, Decision Trees Solution - Revised...

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States of 0.7 Expand $800,000 Maintain Status Quo 1,300,000 Sell Now 320,000 EVPI = $195,000 Good Foreign Competitive Conditions Alternatives
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f Nature 0.3 $500,000 $710,000 (150,000) $865,000 320,000 $320,000 Decision: $865,000 Status Quo Poor Foreign Competitive Conditions Expected Value
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Revised Probability when a Positive Report is G States of Nature Good Conditions 0.7 0.7 Poor Conditions 0.3 0.2 P(P): Revised Probability when a Negative Report is States of Nature Good Conditions 0.7 0.3 Poor Conditions 0.3 0.8 P(N): Prior Probabilities Conditional Probabilities Prior Probabilities Conditional Probabilities
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Given 0.49 0.891 0.06 0.109 0.55 Given 0.21 0.467 0.24 0.533 0.45 Prior x Conditional
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Unformatted text preview: Revised (Posterior Probabilities) Prior x Conditional Revised (Posterior Probabilities) Decision Node Probability Node Payout P(P) 0.55 EV with Consultant's Info $916,118 P(N) 0.45 EVSI: $51,117 Efficiency: 0.26 Expand $767,300 $1,141,950 Maintain $1,141,950 Sell $320,000 Expand $640,100 $640,100 Maintain $527,150 Sell $320,000 P(g|P) $800,000 0.89 P(p|P) 0.11 $500,000 P(g|P) $1,300,000 0.89 P(p|P) 0.11-$150,000 P(g|P) $320,000 0.89 P(p|P) 0.11 $320,000 P(g|N) $800,000 0.47 P(p|N) 0.53 $500,000 P(g|N) $1,300,000 0.47 P(p|N) 0.53-$150,000 P(g|N) $320,000 0.47 P(p|N) 0.53 $320,000...
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This note was uploaded on 09/24/2010 for the course BU 628 taught by Professor Dr.tapp during the Spring '10 term at Georgian.

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Excel, In Class Problem, Decision Trees Solution - Revised...

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