Determine united aerospaces optimal strategy

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Assignment:

United Aerospace has been invited to bid on doing the development work for a new U.S. Air Force bomber. United estimates that the cost of doing the development work will depend on potential technical difficulties but will be either $150 million or $200 million. United estimates that it is three times more likely that the cost will be $150 than $200 million.

United is planning to bid $125 million, $175 million, $200 million, or $225 million for this project. If it bids $125 million, it feels that there is a 85% chance it will win the contract, whereas if it bids $175 million it feels that there is a 70% chance it will get the contract. If the firm bids $200 million it feels that the chance of winning the contract decreases to 40%, and if the firm bids $225 million it feels that there is only a 15% chance that it will win the contract. Determine United Aerospace's optimal strategy for bidding on the development project using a decision tree.

Reference no: EM133333393

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