Creating the decision tree

Assignment Help Basic Statistics

Reference no: EM1313818

Q1) Owner of Sliding By Ski Slopes in southern Pennsylvania mountains is trying to make a decision whether or not to rent snow-making equipment for coming winter season. He has lived in area and operated ski resort for only past four winters.

There are 3 rental equipment options: 1) rent none; 2) rent sufficient to give snow for about 30% of trails; and 3) rent sufficient to give snow for about 60% of the trails. He has projected profits for each of these alternatives under 3 conditions: little snow, average snow, and heavy snow. Data is included in given table.

Projected Profits

Alternative Actions	State
	Little snow	Average snow	Heavy snow
No Rental	$-200,000	$200,000	$600,000
30% trails open	$-100,000	$200,000	$500,000
60% trails open	$100,000	$200,000	$400,000

Finding which alternative action to select depends on how much snow to expect this winter. Owner uses his experience to evaluate probabilities: of last four years in region, one had light snow, two had average snow, and one had heavy snow.

Create the corresponding decision tree and make recommendations.

Reference no: EM1313818

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