Company''s decision-making ability

Reference no: EM13211659

Draw a decision tree to model this problem. Solve the problem by rolling back the tree.

The company has the option of conducting a test at the end of the first phase, at a cost of $250,000. There is an 80% chance that the drug passes the test, and a 20% chance that the drug fails the test. If the drug passes the test there is a 90% chance that it will be a success and a 10% chance it will be a failure. Draw a decision tree including the test option. Solve the decision tree by rolling back the tree.

Compare the results for 1 and 2, and debate if testing improves the company's decision-making ability.

Reference no: EM13211659

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