Influence Diagram to show Factors that influences In

Economic
Condition

Investment Profit
alternative
that influences Investment

omic
ition

ofit
 3a. key in
the 1a. Use max() to find 1c. If the value is Max 2a. Use min() to 2c. If the valu
Probability the max for each of max, show the find the min for of max, sho
of Good alternative alternative name each alternative alternative
Economy

Investment Analysis Model

Optimistic Approach Conservative Approach
Ecomonic Condition
Investment Alternative Strong Weak Max Profit Recommen- Min Profit Recommen
for each dation for each -dation
alternative alternative

Bond 80,000 70,000 Bond Bond

Share 140,000 50,000 Share Share
Venture 200,000 -90,000 Venture Venture
Best Alterantive
Probability of Economic
Condition 0.80 0.20
1b. Find the max
5. Find the alternative correspond to of the max of 2b. Find the max
prob of strong economy = 0.05. Look alternatives of the min of
for nested IF(). Copy to other columns alternatives

Senstivity Analysis - Uncertainty in Economic Conditions lead to different decision

Prob Strong Economy 0.05 0.1 0.15 0.20 0.25 0.30
Prob Weak Economy 0.95
Bond 70,500
Share 54,500
Venture -75,500
Max 70,500
Recommendation Bond Bond Bond Bond Bond Bond
 2c. If the value is Max
of max, show the
alternative name

Expected Value 4a. Find the expected

Approach value for each
Expected Recommen- alternative using Sum
Value each dation of Proabilty x payoff.
alternaive Try out for Share and
Venture

78,000
Share
Venture

4c. If the value is

d the max 4b. Find the Max expected value,
min of max of show the alternative
natives Expected Value name

0.35 0.4 0.45 0.50 0.55 0.60 0.65 0.7 0.75 0.80

Bond Bond Bond Bond Bond Bond Bond Bond Bond Bond
0.85 0.90 0.95 1

Bond Bond Bond Bond