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    Hassan
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    This document presents a decision tree to help Ventron decide between two options - sectioning or improved extrusion - to maximize expected monetary value. Option A involves sectioning at a cost of $1.8 million over 12 months. Option B involves improving extrusion materials at a cost of $300,000 over 6 months, then modifying the process at a cost of $960,000 over 6 months, with success probabilities of 90% and 75% respectively. The expected monetary value is calculated for each option. It is determined that Ventron should subscribe to perfect information about the extrusion process, as the expected value without information is only $200,000 compared to $1.466 million with information. Vent

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    Decision Modelling

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    375809772 - Decision Modelling

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    This document presents a decision tree to help Ventron decide between two options - sectioning or improved extrusion - to maximize expected monetary value. Option A involves sectioning at a cost of $1.8 million over 12 months. Option B involves improving extrusion materials at a cost of $300,000 over 6 months, then modifying the process at a cost of $960,000 over 6 months, with success probabilities of 90% and 75% respectively. The expected monetary value is calculated for each option. It is determined that Ventron should subscribe to perfect information about the extrusion process, as the expected value without information is only $200,000 compared to $1.466 million with information. Vent

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    5 views9 pages

    Decision Modelling

    Uploaded by

    Hassan
    This document presents a decision tree to help Ventron decide between two options - sectioning or improved extrusion - to maximize expected monetary value. Option A involves sectioning at a cost of $1.8 million over 12 months. Option B involves improving extrusion materials at a cost of $300,000 over 6 months, then modifying the process at a cost of $960,000 over 6 months, with success probabilities of 90% and 75% respectively. The expected monetary value is calculated for each option. It is determined that Ventron should subscribe to perfect information about the extrusion process, as the expected value without information is only $200,000 compared to $1.466 million with information. Vent

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 9

    Case 6.

    4 Developing a Helicopter Component for Army

    Part a. Development of the Decision Tree in order to Maximize


    Option A Process - Sectioning
    Option B Process -Improves Extrusion

    200 (Months -12)


    A (Option) (Dollars) Deciding
    Option

    DECIDE EMV=

    B (Option) [0.1] Fail


    Improvement
    in Materials
    [0.1] Success
    Decide on
    option
    EMV= 1466.00

    EMV=

    Numbers are in K
    Revenue: 2000.00
    A Option

    Sectioning (Cost) -1800.00 (Months -12)


    ACC Sectioning (Cost) -2400.00 (Months -6)
    Calculation of Probabilities
    B Option Success Fail
    Improvement in Materials -300.00 Months -6 0.9 0.1
    Process of Modification -960.00 Months -6 0.75 0.25
    Benefits (Side) 2000.00 If and Only if, both are successful.

    Requirement for Condition


    1 The work has to be completed in 18 Months.
    NOTE: It is assumed that Step 1 and Step 2 are independent.
    The process of Extrusion is beneficial.

    Part b. The Value of Side Benefits be


    Part c. Ventron's Willingness to pay for th
    Calculation of E.M.V with PI (free) - E.M.V

    The p
    Furthermore, EMV for sectioning
    EVPI = 1266000 Yes, the answer can be found. Ventron has the str

    By changing the different types of data , the side benefits is ca


    in order to Maximize the EMV for Ventron

    Deciding Sectioning
    Option -100.00 (Months -18)

    -100.00

    section -100.00 (Months - 18)

    Decide on FAIL
    option

    Procees of
    Modification
    1640.00
    modify press

    EMV= 1640.00 SUCCESS


    lue of Side Benefits between two alternatives.
    llingness to pay for the Improved Extrusion Process

    The process calculates the EMV with free information to be 1,466,000.


    re, EMV for sectioning proces without any information is 200,000. 00. Therefore, it is recommended to subscribe.
    d. Ventron has the strong willingness to pay for the perfect information about the extrusion process whether it is successf

    , the side benefits is calculated to be 124,450 as all the numbers same.


    -1660.00 Months -18 There ia a need for Accelerated Sectioning.

    2740.00
    nded to subscribe.
    cess whether it is successful or not.
    Case 6.4 Developing a Helicopter Component for Army

    Ventron Different Between two Alternativ


    A Option Process - Sectioning
    B Option Process - Improved Extrusion

    1,800,000 (12 month)

    Process - Sectioning

    Deciding Factor Improvement in


    Materials

    Process - Extrusion
    300,000.00
    Months - 6

    1,800,000.00

    Revenue: 2000
    1 It hs to be completed in 18 Months.
    Option A

    Cost of sectioning -1800.00 Months -12

    Cost of acc sectioning -2400.00 Months -6


    Calculation of Probabilities
    Option B SUCCESS FAIL
    Improvement in Materials -300.00 Months - 6 0.9 0.1
    Process of Modification -960.00 Months - 6 0.75 0.25
    Benefits (Side) 2000.00 If and Only if, both are successful.

    By changing the different types of data , the side benefit


    etween two Alternatives ?

    180,000.00
    section
    1,800,000.00 Months - 18

    600,000.00

    Modification Percentage for Success (25%)


    in process

    Successful %90
    960,000.00 Percentage for Success (75%)
    Months - 6
    693,333.00
    1,487,999.70

    93,333.00

    data , the side benefits is calculated to be 124,450 as all the numbers same.
    2,400,000.00

    e for Success (25%)

    rcentage for Success (75%)

    Benefits (Side) -124,444.00

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