A favorable report from the studywould increase the probability of a favorable rental market to 0.9.Furthermore, an unfavorable report from the additional informationwould decrease the probability of a favorable rental market to 0.4.Of course, Bill could forget all of these numbers and do nothing. Open a new worksheet, choose the TreePlan ribbon, and click the TreePlan button, click the New Tree button, and TreePlan creates an initial tree with two branches, select a node, and run TreePlan to change the structure of your decision tree, enter branch names, cash flows, and probabilities, and. Without gatheringadditional information, Bill estimates that the probability of afavorable rental market is 0.7. With anunfavorable rental market, however, Bill could lose $20,000 withthe quadplex or $10,000 with the duplex. If the rental market is favorable,Bill will earn $15,000 with the quadplex or $5,000 with the duplex.Bill doesn’t have the financial resources to do both. Bill believes that there is a 50–50 chance that theinformation will be favorable. If he gathersadditional information, the results could be either favorable orunfavorable, but it would cost him $3,000 to gather theinformation. He can build aquadplex (i.e., a building with four apartments), build a duplex,gather additional information, or simply do nothing. Can anyone know how to solve this with Excel QM Decisionanalysis Decision Trees if not please don't answer thesame available on Chegg.īill Holliday is not sure what he should do.
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