and get no information, Branch 6 (3â€“17) is the decision to not build the retail store and to get noinformation, Branch 7 (4â€“6) is the decision to build the retail store given favorable information,Branch 8 (4â€“11) is the decision to not build given favorable information, Branch 9 (6â€“9) is asuccessful retail store given favorable information, Branch 10 (6â€“10) is an unsuccessful retailstore given favorable information, Branch 11 (5â€“7) is the decision to build the retail store givenunfavorable information, Branch 12 (5â€“14) is the decision not to build the retail store givenunfavorable information, Branch 13 (7â€“12) is a successful retail store given unfavorableinformation, Branch 14 (7â€“13) is an unsuccessful retail store given unfavorable information,Branch 15 (8â€“15) is a successful retail store given that no information is obtained, and Branch 16(8â€“16) is an unsuccessful retail store given no information is obtained.3-35

Results for 3-52. a.StartEndingBranchProfitUseNodeNodeNodeNodeProb.(EndNode)Branch?TypeValueStart0100Dec29,200Branch 11200YesCh29,200Branch 21300Dec28,000Branch 3240.60Dec62,000Branch 4250.40Decâ€“20,000Branch 53800YesCh28,000Branch 631700Fin0Branch 74600YesCh62,000Branch 84110â€“20,000Finâ€“20,000Branch 9690.980,000Fin80,000Branch 106100.1â€“100,000Finâ€“100,000Branch 115700Châ€“64,000Branch 125140â€“20,000YesFinâ€“20,000Branch 137120.280,000Fin80,000Branch 147130.8â€“100,000Finâ€“100,000Branch 158150.6100,000Fin100,000Branch 168160.4â€“80,000Finâ€“80,0003-36

b. The suggested changes would be reflected in Branches 3 and 4. The decision stays the same,but the EMV increases to $37,400. The results are provided in the tables that follow. In thesetables, BR = Branch; Prob. = Probability; and for Node Type, Dec = Decision, Ch = Chance, andFin = Final.Results for 3-52. b.StartEndingBranchProfitUseNodeNodeNodeNodeProb.(EndNode)Branch?TypeValueStart0100Dec37,400Branch 11200YesCh37,400Branch 21300Dec28,000Branch 3240.70Dec62,000Branch 4250.30Decâ€“20,000Branch 53800YesCh28,000Branch 631700Fin0Branch 74600YesCh62,000Branch 84110â€“20,000Finâ€“20,000Branch 9690.980,000Fin80,000Branch 106100.1â€“100,000Finâ€“100,000Branch 115700Châ€“64,000Branch 125140â€“20,000YesFinâ€“20,000Branch 137120.280,000Fin80,000Branch 147130.8â€“100,000Finâ€“100,000Branch 158150.6100,000Fin100,000Branch 168160.4â€“80,000Finâ€“80,0003-37

c. Sue can determine the impact of the change by changing the probabilities and recomputingEMVs. This analysis shows the decision changes. Given the new probability values, Sueâ€™s best de-cision is build the retail store without getting additional information. The EMV for this decision is$28,000. The results are presented below:Results for 3-52. c.StartEndingBranchProfitUseNodeNodeNodeNodeProb.(EndNode)Branch?TypeValueStart0100Dec28,000Branch 11200Ch18,400Branch 21300YesDec28,000Branch 3240.60Dec44,000Branch 4250.40Decâ€“20,000Branch 53800YesCh28,000Branch 631700Fin0Branch 74600YesCh44,000Branch 84110â€“20,000Finâ€“20,000Branch 9690.

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Term

Spring

Professor

Alfandre

Tags

EMV