In a decision tree problem involving capacity planning, there was a random outcome node with three...

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In a decision tree problem involving capacity planning, there was a random outcome node with three...

In a decision tree problem involving capacity planning, there was a random outcome node with three random outcomes (A,B, and C) which followed a decision node. The probabilities for A and B are P(A)=0.4 and P(B) = 0.5. Payoff following A,B and C respectively are $10000, $5000 and $2000. The expected value of that random outcome node is:
1. $7400
2. $6700
3. $17000
4. $9800

business Operations-Management

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Answer 1

Answer #1

Expected value of the random outcome mode = P(A)*Payoff of A+P(B)*Payoff of B+P(C)*Payoff of C

P(C) = 1-{P(A)-P(B)

= 10000*0.4+5000*0.5+2000*0.1 = 6700

Option b is right

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Answer 2

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In a decision tree problem involving capacity planning, there was a random outcome node with three...

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