Draw a decision tree and calculate the emv

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Reference no: EM131162250

CEO of a multihospital system is planning to expand operations into various states. It will take several years to get certifi cate of need (CON) approvals so that the new facilities can be constructed. The eventual cost (in millions of dollars) of building a facility will differ among states, depending upon fi nances, labor, and the economic and political climate. An outside consulting fi rm estimated the costs for the new facilities as based on declining, similar, or improving economies, and the associated probabilities as shown in Table EX 3.3 .

a. The CEO remembered the Decision Support Systems class from graduate studies (a long time ago) and decided to use that information for the company ' s decision process. The first action was to draw a decision tree and calculate the EMV for each event node; then the best site would be selected for the next hospital for the system.

b. However, feeling uneasy with the limited data, the CEO wanted to collect more information about economic conditions and to allocate money in the budget for that purpose.

The CEO remembered that there is a way to calculate how much the company can tolerate for the additional information.

Reference no: EM131162250

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