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
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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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