Reference no: EM131030639
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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