Ask quesoil company is considering whether or not to bid for an offshore drilling contract. If they bid, the value would be $600m with a 65% chance of gaining the contract. The company may set up a new drilling operation or move its already existing operation, which has proved successful to the new site. The probability of success and expected returns (in $m) are as follows:
outcome New operation Existing operation
Probability Expected return Probability Expected return
Success 0.75 800 0.85 700
Failure 0.25 200 0.15 350

If the company does not bid or lose the contract, they can use the $600m to modernise their operations. This would result in a return of either 5% or 10% on the sum invested with probabilities 0.45 and 0.55 respectively.
With the aid of a decision tree, prepare a detailed quantitative report advising the company on the best course of action.

tion #Minimum 100 words accepted#

Posted Date: 3/23/2016 5:44:16 AM | Location : Malawi

Ask an Expert

Related Discussions:- expected monetary value, Assignment Help, Ask Question on expected monetary value, Get Answer, Expert's Help, expected monetary value Discussions

Write discussion on expected monetary value
Your posts are moderated

Write your message here..

Related Questions

Explain lie factor, Lie factor : A measure suggested by Tufte for judging t... Lie factor : A measure suggested by Tufte for judging the honesty of the graphical presentation of data. Which can be calculated as follows   The values close to one are desir

Indirect standardization, Indirect standardization is the procedure of adju... Indirect standardization is the procedure of adjusting the crude mortality or morbidity rate for one or more variables by making use of a known reference population. It may, for in

Queuing theory, 1) Let N1(t) and N2(t) be independent Poisson processes wit... 1) Let N1(t) and N2(t) be independent Poisson processes with rates, ?1 and ?2, respectively. Let N (t) = N1(t) + N2(t). a) What is the distribution of the time till the next epoch

Explain national lotteries, National lotteries : Games of chance held to he... National lotteries : Games of chance held to heave money for particular causes. The first held in the UK took place in the year 1569 principally to raise money for repair of the Ci

Mosaic displays, Mosaic displays  is the graphical display of the standardi... Mosaic displays  is the graphical display of the standardized residuals from the fitting a log-linear model to a contingency table in which the colour and outline of the mosaic's '

Adjusted r-squared, R-squared is regarded as the coefficient of determinati... R-squared is regarded as the coefficient of determination and is used to give the proportion of the fluctuation of the variance of one variable to another variable. R-squared also

Case Study, ACC – A pioneer in the Indian cement industry Associated Cemen... ACC – A pioneer in the Indian cement industry Associated Cement Companies Ltd. (ACC) came into existence in 1936, after the merger of 10 companies belonging to four important bus

Cointegration, Cointegration : The vector of not motionless time sequence i... Cointegration : The vector of not motionless time sequence is said to be cointegrated if the linear combination of the individual series is stationary. Facilitates suitable testing

Quality control procedures, Quality control procedures is the statistical ... Quality control procedures is the statistical process designed to ensure that the precision and accuracy of, for instance, a laboratory test, are maintained within the acceptable

T test , How do I report the results in the table? How do I report the results in the table?