Decision Tree Analysis Amar company is currently working with a process of offering payments for materials, labour etc.

brings a profit of 12000 Rs. Ho following alternatives are made available to the company. 1. The company can conduct research(R1) which is expected to cost 10,000 Rs having 90% chance of success. If it proves success the company can get a gross income of 25,000Rs. 2. The company can conduct research (R2) to which is respected to can 8000Rs having a probability of 60% success the gross income will be 25000Rs. 3. The company can pay 6000Rs as loyality for a new process which will have a gross income of 20000RS Currently the company continuous currently working process because of limited resources by using decision tree analysis of the company.

Decision Conducted Research(R1)

Event Success Failure

Probability 90% = 0.9 10% = 0.1

Gross Income 25000 0 - cost =

Expected Net Income 22500 =0 22500 10000 12500 15000 =0 15000 8000 7000 20000 6000 14000

Conducted Research (R2`)

Success Failure

60% = 0.6 40% = 0.4

25000 0 - cost = Net EMV =

New Process

Success

100% =1

20000 -Loyality =

Current Process

Success Certain

100%=100 = 1 100

12000

12000 x 1 = 12000 Net EMV = 12000

Therefore the optimal strategy for the company is to select new process because it has consisted net EMV