Analyze the problem using a decision tree

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Operations Management 12th Edition, Chapster 5S, Problem 2

Refer to Problem 1. Suppose after a certain amount of discussion, the contractor is able to subjectively assess the probabilities of low and high demand: P(low) = .3 and P(high) = .7.

a. Determine the expected profit of each alternative. Which alternative is best? Why?

b. Analyze the problem using a decision tree. Show the expected profit of each alternative on the tree.

c. Compute the expected value of perfect information. How could hte contractor use this knowledge?

Reference no: EM131147525

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