Decision tree and the optimal decision

Reference no: EM13968797

A cable television company is considering extending its services to a rural community. The company's managing director believes that there is a 0.50 chance that pro?ts from the service will be high and amount to $760,000 in the ?rst year, and a 0.50 chance that pro?ts will be low and amount to $400,000 for the year. An alter- native operation promises a sure pro?t of $500,000 for the period in question. The company may test the potential of the rural market for a cost of $25,000. The test has a 90% reliability of correctly detecting the state of nature. Construct the decision tree and determine the optimal decision.

Reference no: EM13968797

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