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  • Decision Tree Numerical Solution

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    Ravi Gupta
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    The document outlines a decision tree for introducing a new car model. It shows possible outcomes of introducing the car with or without test marketing. It also includes probabilities and costs associated with each outcome. A second decision tree evaluates investing in one of two companies based on probabilities of the market being bullish or bearish.

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    Decision Tree

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    The document outlines a decision tree for introducing a new car model. It shows possible outcomes of introducing the car with or without test marketing. It also includes probabilities and costs associated with each outcome. A second decision tree evaluates investing in one of two companies based on probabilities of the market being bullish or bearish.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as ppt, pdf, or txt
    24 views3 pages

    Decision Tree Numerical Solution

    Uploaded by

    Ravi Gupta
    The document outlines a decision tree for introducing a new car model. It shows possible outcomes of introducing the car with or without test marketing. It also includes probabilities and costs associated with each outcome. A second decision tree evaluates investing in one of two companies based on probabilities of the market being bullish or bearish.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as ppt, pdf, or txt
    of 3

    DECISION TREE NUMERICAL

    SOLUTION

    + 10.6 HIGH ACCEPTANCE: p=0.64 INTRODUCE NEW CAR + 25

    C2

    - 15 + 10.6 FAVOURABLE RESULTS: p=0.5 LOW ACCEPTANCE: p=0.36

    D2
    TEST MARKET + 5.3 DROP PROPOSAL - 8.6 COST Rs.4.0 crores C1 INTRODUCE NEW CAR NIL - 15 LOW ACCEPTANCE: p=0.84 HIGH ACCEPTANCE: p=0.16 NIL

    + 25

    + 1.3 D1

    C3

    UNFAVUORABLE RESULTS: p=0.5

    D3

    NIL

    DROP PROPOSAL

    + 1.0

    HIGH ACCEPTANCE: p=0.4

    + 25

    NO TEST MARKET

    C4
    - 15 LOW ACCEPTANCE: p=0.6

    Profit / Returns

    Bullish Market (+110,000) Probability = 0.55

    + Rs. 200,000

    Invest in company A +Rs. 65,000 Rs. 500,000 Invest in company B +52,500

    Bearish Market (-45,000) Probability = 0. 45

    - Rs. 100,000

    Bullish Market (+41,250) Probability = 0.55

    +Rs. 75,000/-

    Bearish Market (+11,250) Probability = 0.45

    +Rs. 25,000/-

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