Emergency power generator should be installed

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Reference no: EM131795942

The management of xxx is concerned about the potential loss that would result from a power failure to its computer and network operations. The monetary loss from one of these incidents could be catastrophic, including losses resulting from data recovery, interrupted service, customer relations, lost earnings, and possible legal issues. Bank management is condisering installing an emergency power generator at its corporate headquarters. The cost of the generator is $800000. If the emergency generator is not installed then there is a 10% chance that a power outage will occur during the next year. If there is an outage, there is a 5% chance that the resulting loss will be very large at $80 million: alternatively, there is a 95% chance that the loss will far less at $1 million.

Using the decision tree analysis, determine in the following steps whether the emergency power generator should be installed.

1. Present the decision tree for this problem.

2. Annotate the diagram in previous part with the expected monetary value of each and every decision node.

3. State your decision to either install or not to install the emergency power generator. State the basis of your decision.

Reference no: EM131795942

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