Ch04_Decision_Trees

# Ch04_Decision_Trees - Example 4.2 Decision trees Value...

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Example 4.2 - Decision trees Value Revenue Move Cost Strong Growth \$765,000 \$975,000 \$210,000 0.55 Move \$585,000 Weak Growth \$365,000 \$575,000 \$210,000 0.45 Strong Growth \$863,000 \$950,000 \$87,000 0.55 \$703,750 Expand \$660,500 Weak Growth \$413,000 \$500,000 \$87,000 0.45 Expand \$843,000 \$930,000 \$87,000 Strong Growth \$850,000 0.55 Do Nothing \$703,750 Do Nothing \$850,000 \$850,000 \$0 Weak Growth \$525,000 \$525,000 \$0 0.45 Hacker's Computer Store

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Exhibit 4.4 - Decision Tree Analysis EV= \$585,000.00 \$765,000.00 Strong Growth 0.55 \$365,000.00 Weak Growth 0.45 EV= \$660,500.00 \$863,000.00 Strong Growth 0.55 \$413,000.00 Weak Growth 0.45 EV= \$850,000.00 Strong Growth 0.55 EV= \$703,750.00 Weak Growth \$525,000.00 0.45 Alternative Revenue Move to new location, strong growth \$975,000.00 Move to new location, weak growth \$575,000.00 Expand Store, strong growth \$950,000.00 Expand Store, weak growth \$500,000.00 Do nothing now, strong growth, expand next year \$930,000.00 Do nothing now, strong growth, do not expand next year \$850,000.00 Do nothing now, weak growth \$525,000.00
Expand \$843,000.00 Do Nothing \$850,000.00 Cost Value \$210,000.00 \$765,000.00

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Ch04_Decision_Trees - Example 4.2 Decision trees Value...

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