Total Cost

Data for Problem Prob. of Success Months Monthly Cost ($000)

New Materials
Material Testing .90 6 50 300
Molding Process .75 6 160 960
Conventional Materials
Normal Basis 1.00 12 150 1,800
Accelerated Basis 1.00 6 400 2,400

Conventional
$1,800
$1,800 $1,800

.90
Material Testing Success
.75 $1,260
Molding Process Success Material Testing $1,260
1
Note: TreePlan is set to Minimize
Costs. (This option is availalbe $0 $1,500 $300 $1,500 .10
under Options in any TreepLan Material Testing Failure
dialog box.) Molding Process First $3,660
$2,400 $3,660
$960 $1,815
.25
Molding Process Failure
$2,760
$1,800 $2,760

.75
Molding Process Success
1 .90 $1,260
$1,800 Material Testing Success Molding Process $1,260
1
$0 $1,860 $960 $1,860 .25
Molding Process Failure
Material Testing First $3,660
$2,400 $3,660
$300 $1,884
.10
Material Testing Failure
$2,100
$1,800 $2,100

.75
Molding Process Success
0.90 $1,260
Material Testing Success $1,260

$0 $1,710 .25
Molding Process Failure
Both in Parallel $3,060
$1,800 $3,060
$1,260 $1,845
0.10
Material Testing Failure
$3,060
$1,800 $3,060

Data table: sensitivity to the bonus associated with the new process
Best Alternative Conventional Molding Process First Material Testing First Both in Parallel
0 1,800 - - -
0 0 0 0
100 0 0 0
200 0 0 0
300 0 0 0
400 0 0 0
500 0 0 0
600 0 0 0
700 0 0 0
800 0 0 0
900 0 0 0
1,000 0 0 0
1,100 0 0 0
1,200 0 0 0
1,300 0 0 0
1,400 0 0 0
1,500 0 0 0
1,600 0 0 0
1,700 0 0 0
1,800 0 0 0
1,900 0 0 0
2,000 0 0 0
2,100 0 0 0
2,200 0 0 0
2,300 0 0 0
2,400 0 0 0

Data table: sensitivity to probability that the material improvement is successful

p(success) Best Alternative Conventional Molding Process First Material Testing First Both in Parallel
0 1,800 0 0 0
0.00 0 0 0
0.05 0 0 0
0.10 0 0 0
0.15 0 0 0
0.20 0 0 0
0.25 0 0 0
0.30 0 0 0
0.35 0 0 0
0.40 0 0 0
0.45 0 0 0
0.50 0 0 0
0.55 0 0 0
0.60 0 0 0
0.65 0 0 0
0.70 0 0 0
0.75 0 0 0
0.80 0 0 0
0.85 0 0 0
0.90 0 0 0
0.95 0 0 0
1.00 0 0 0

Data table: sensitivity to probability that press modification is successful

p(success) Best Alternative Conventional Molding Process First Material Testing First Both in Parallel
0 1,800 0 0 0
0.00 0 0 0
0.05 0 0 0
0.10 0 0 0
0.15 0 0 0
0.20 0 0 0
0.25 0 0 0
0.30 0 0 0
0.35 0 0 0
0.40 0 0 0
0.45 0 0 0
0.50 0 0 0
0.55 0 0 0
0.60 0 0 0
0.65 0 0 0
0.70 0 0 0
0.75 0 0 0
0.80 0 0 0
0.85 0 0 0
0.90 0 0 0
0.95 0 0 0
1.00 0 0 0

TreePlan Student License, For Education Only TreePlan.com

 ID Name Value Prob Pred Kind NS S1 S2 S3 S4 S5 Row Col Mark
0 0 TreePlan 0 0 0D 4 1 2 9 18 0 22 1 TRUE
0 1 0 0T 0 0 0 0 0 0 2 5 TRUE
0 2 0 0E 2 3 4 0 0 0 13 5 TRUE
0 3 2D 1 5 0 0 0 0 9 9 TRUE
0 4 2T 0 0 0 0 0 0 17 9 TRUE
6 5 0 3E 2 7 8 0 0 0 9 13 TRUE
0 6 13 T 0 0 0 0 0 0 42 13 TRUE
23 7 5T 0 0 0 0 0 0 7 17 TRUE
24 8 5T 0 0 0 0 0 0 12 17 TRUE
0 9 0 0E 2 10 11 0 0 0 28 5 TRUE
0 10 9D 1 12 0 0 0 0 24 9 TRUE
0 11 9T 0 0 0 0 0 0 32 9 TRUE
0 12 0 10 E 2 14 15 0 0 0 24 13 TRUE
0 13 18 E 2 16 6 0 0 0 39 9 TRUE
0 14 12 T 0 0 0 0 0 0 22 17 TRUE
0 15 12 T 0 0 0 0 0 0 27 17 TRUE
0 16 13 T 0 0 0 0 0 0 37 13 TRUE
0 17 18 T 0 0 0 0 0 0 47 9 TRUE
0 18 0 0E 2 13 17 0 0 0 43 5 TRUE

TreePlan Student License, For Education Only TreePlan.com

 Total Cost
Data for Problem Prob. of Success Months Monthly Cost ($000)
New Materials
Material Testing .90 6 50 300
Molding Process .75 6 160 960
Conventional Materials
Normal Basis 1.00 12 150 1,800
Accelerated Basis 1.00 6 400 2,400

Conventional
$1,800
$1,800 $1,800

.90
Material Testing Success
.75 $1,260
Molding Process Success Material Testing $1,260
1
Note: TreePlan is set to Minimize
Costs. (This option is availalbe under $0 $1,500 $300 $1,500 .10
Options in any TreepLan dialog box.) Material Testing Failure
Molding Process First $3,660
$2,400 $3,660
$960 $1,815
.25
Molding Process Failure
$2,760
$1,800 $2,760

.75
Molding Process Success
1 .90 $1,260
$1,800 Material Testing Success Molding Process $1,260
1
$0 $1,860 $960 $1,860 .25
Molding Process Failure
Material Testing First $3,660
$2,400 $3,660
$300 $1,884
.10
Material Testing Failure
$2,100
$1,800 $2,100

.75
Molding Process Success
0.90 $1,260
Material Testing Success $1,260

$0 $1,710 .25
Molding Process Failure
Both in Parallel $3,060
$1,800 $3,060
$1,260 $1,845
0.10
Material Testing Failure
$3,060
$1,800 $3,060

Data table: sensitivity to the bonus associated with the new process
Best Alternative Conventional Molding Process First Material Testing First Both in Parallel
0 1,800 - - -
0 0 0 0
100 0 0 0
200 0 0 0
300 0 0 0
400 0 0 0
500 0 0 0
600 0 0 0
700 0 0 0
800 0 0 0
900 0 0 0
1,000 0 0 0
1,100 0 0 0
1,200 0 0 0
1,300 0 0 0
1,400 0 0 0
1,500 0 0 0
1,600 0 0 0
1,700 0 0 0
1,800 0 0 0
1,900 0 0 0
2,000 0 0 0
2,100 0 0 0
2,200 0 0 0
2,300 0 0 0
2,400 0 0 0

Data table: sensitivity to probability that the material improvement is successful

p(success) Best Alternative Conventional Molding Process First Material Testing First Both in Parallel
0 1,800 0 0 0
0.00 0 0 0
0.05 0 0 0
0.10 0 0 0
0.15 0 0 0
0.20 0 0 0
0.25 0 0 0
0.30 0 0 0
0.35 0 0 0
0.40 0 0 0
0.45 0 0 0
0.50 0 0 0
0.55 0 0 0
0.60 0 0 0
0.65 0 0 0
0.70 0 0 0
0.75 0 0 0
0.80 0 0 0
0.85 0 0 0
0.90 0 0 0
0.95 0 0 0
1.00 0 0 0

Data table: sensitivity to probability that press modification is successful

p(success) Best Alternative Conventional Molding Process First Material Testing First Both in Parallel
0 1,800 0 0 0
0.00 0 0 0
0.05 0 0 0
0.10 0 0 0
0.15 0 0 0
0.20 0 0 0
0.25 0 0 0
0.30 0 0 0
0.35 0 0 0
0.40 0 0 0
0.45 0 0 0
0.50 0 0 0
0.55 0 0 0
0.60 0 0 0
0.65 0 0 0
0.70 0 0 0
0.75 0 0 0
0.80 0 0 0
0.85 0 0 0
0.90 0 0 0
0.95 0 0 0
1.00 0 0 0

TreePlan Student License, For Education Only TreePlan.com

 ID Name Value Prob Pred Kind NS S1 S2 S3 S4 S5 Row Col Mark
0 0 TreePlan 0 0 0D 4 1 2 9 18 0 22 1 TRUE
0 1 0 0T 0 0 0 0 0 0 2 5 TRUE
0 2 0 0E 2 3 4 0 0 0 13 5 TRUE
0 3 2D 1 5 0 0 0 0 9 9 TRUE
0 4 2T 0 0 0 0 0 0 17 9 TRUE
6 5 0 3E 2 7 8 0 0 0 9 13 TRUE
0 6 13 T 0 0 0 0 0 0 42 13 TRUE
23 7 5T 0 0 0 0 0 0 7 17 TRUE
24 8 5T 0 0 0 0 0 0 12 17 TRUE
0 9 0 0E 2 10 11 0 0 0 28 5 TRUE
0 10 9D 1 12 0 0 0 0 24 9 TRUE
0 11 9T 0 0 0 0 0 0 32 9 TRUE
0 12 0 10 E 2 14 15 0 0 0 24 13 TRUE
0 13 18 E 2 16 6 0 0 0 39 9 TRUE
0 14 12 T 0 0 0 0 0 0 22 17 TRUE
0 15 12 T 0 0 0 0 0 0 27 17 TRUE
0 16 13 T 0 0 0 0 0 0 37 13 TRUE
0 17 18 T 0 0 0 0 0 0 47 9 TRUE
0 18 0 0E 2 13 17 0 0 0 43 5 TRUE

TreePlan Student License, For Education Only TreePlan.com

 A B C D E F G H I J K L M N O P Q R S T U V W X Y Z AA

2 Total Cost
Data for Problem Prob. of Success Months Monthly Cost ($000)
3 New Materials This "complex tree" includes the hedging decisions after completing the
4 Material Testing .90 6 50 300
first research stage. This is the basis for the sensitivity analysis in the later
5 Molding Process .75 6 160 960
6 Conventional Materials worksheets.
7 Normal Basis 1.00 12 150 1,800
8 Accelerated Basis 1.00 6 400 2,400
9
10 "Bonus" for New Materials 0 (cost reduction)
11
12
13
14 Conventional
15 $1,800
16 $1,800 $1,800
17 Although the base-case solution does not assume any bonus for successful
18 development of the new materials, a parameter to represent such a bonus was .90
19 included in the model (in cell G9). It was included as a cost reduction in all Material Testing Success
20 $1,260
terminal branches of the tree in which the new materials was successful--these
21 Material Testing $0 $1,260
22 have been colored orange. The base-case value of this parameter was zero, but
23 it was subsequently varied in the sensitivity analysis. $300 $1,500 .10
24 Material Testing Failure
25 .75 $3,660
26 Molding Process Success $2,400 $3,660
27 1
28 $0 $1,500 .90
29 Material Testing Success
30 $2,160
31 Mat. Testing & Start Conventio$0 $2,160
32 Molding Process First
33 $1,200 $2,250 .10
34 $960 $1,815 Material Testing Failure
35 $3,060
36 $900 $3,060
37
38 .25
39 Molding Process Failure
40 $2,760
41 $1,800 $2,760
42 CHOOSE function added here after tree was completed
43 in order to display the LABEL of the optimal decision .75
44 branch Conventional Molding Process Success
45 1 $1,260
46 $1,800 Molding Process $0 $1,260
47
48 $960 $1,860 .25
49 Molding Process Failure
50 .90 $3,660
51 Material Testing Success $2,400 $3,660
52 1
53 $0 $1,860 .75
54 Molding Process Success
55 $2,160
56
Data Tables are Below Molding & Start Conventional $0 $2,160
57 | Material Testing First
58 | $1,860 $2,385 0.25
59 V $300 $1,884 Molding Process Failure
60 $3,060
61 $900 $3,060
62
63 .10
64 Material Testing Failure
65 $2,100
66 $1,800 $2,100
67
68 .75
69 Molding Process Success
70 0.90 $1,260
71 Material Testing Success $0 $1,260
72
73 $0 $1,710 .25
74 Molding Process Failure
75 Both in Parallel $3,060
76 $1,800 $3,060
77 $1,260 $1,845
78 0.10
79 Material Testing Failure
80 $3,060
81 $1,800 $3,060
82

TreePlan Student License, For Education Only TreePlan.com

 A B C D E F G H I J K L M N O P Q R S T U V W X Y Z AA

2 Total Cost
Data for Problem Prob. of Success Months Monthly Cost ($000)
3 New Materials This "complex tree" includes the hedging decisions after completing the
4 Material Testing .90 6 50 300
first research stage. This is the basis for the sensitivity analysis in the later
5 Molding Process .75 6 160 960
6 Conventional Materials worksheets.
7 Normal Basis 1.00 12 150 1,800
8 Accelerated Basis 1.00 6 400 2,400
9
10 "Bonus" for New Materials 0 (cost reduction)
11
12
13
14 Conventional
15 $1,800
16 $1,800 $1,800
17 Although the base-case solution does not assume any bonus for successful
18 development of the new materials, a parameter to represent such a bonus was .90
19 included in the model (in cell G9). It was included as a cost reduction in all Material Testing Success
20 $1,260
terminal branches of the tree in which the new materials was successful--these
21 Material Testing $0 $1,260
22 have been colored orange. The base-case value of this parameter was zero, but
23 it was subsequently varied in the sensitivity analysis. $300 $1,500 .10
24 Material Testing Failure
25 .75 $3,660
26 Molding Process Success $2,400 $3,660
27 1
28 $0 $1,500 .90
29 Material Testing Success
30 $2,160
31 Mat. Testing & Start Conventio$0 $2,160
32 Molding Process First
33 $1,200 $2,250 .10
34 $960 $1,815 Material Testing Failure
35 $3,060
36 $900 $3,060
37
38 .25
39 Molding Process Failure
40 $2,760
41 $1,800 $2,760
42 CHOOSE function added here after tree was completed
43 in order to display the LABEL of the optimal decision .75
44 branch Conventional Molding Process Success
45 1 $1,260
46 $1,800 Molding Process $0 $1,260
47
48 $960 $1,860 .25
49 Molding Process Failure
50 .90 $3,660
51 Material Testing Success $2,400 $3,660
52 1
53 $0 $1,860 .75
54 Molding Process Success
55 $2,160
56
Data Tables are Below Molding & Start Conventional $0 $2,160
57 | Material Testing First
58 | $1,860 $2,385 0.25
59 V $300 $1,884 Molding Process Failure
60 $3,060
61 $900 $3,060
62
63 .10
64 Material Testing Failure
65 $2,100
66 $1,800 $2,100
67
68 .75
69 Molding Process Success
70 0.90 $1,260
71 Material Testing Success $0 $1,260
72
73 $0 $1,710 .25
74 Molding Process Failure
75 Both in Parallel $3,060
76 $1,800 $3,060
77 $1,260 $1,845
78 0.10
79 Material Testing Failure
80 $3,060
81 $1,800 $3,060
82

TreePlan Student License, For Education Only TreePlan.com

 $2,000 Base
Case
Values

Conventional

$1,800
Expected costs (000s)

Molding Process
First
$1,600

Work in Parallel

$1,400

Material Testing First

$1,200

$1,000
$0 $80 $160 $240 $320 $400 $480

"Bonus" associated with new materials (000s)

 $3,500

$3,000

Molding Process
First
Expected costs (000s)

$2,500 Work in Parallel

Material Testing First

$2,000

Conventional
$1,500 Base
Case:
Prob. =
0.9

$1,000
0.00 0.20 0.40 0.60 0.80 1.00

Probability of Success on Material Testing

 $3,500

$3,000 Material Testing First

Expected costs (000s)

$2,500 Work in Parallel

Molding Process
First

$2,000

Conventional
$1,500 Base
Case:
Prob.
= .75

$1,000
0.00 0.20 0.40 0.60 0.80 1.00

Probability of Success on Molding Process

 $2,500

Material Testing First

Expected costs (000s)

Molding Process
$2,000 First
Work in Parallel

Conventional
Base
Case =
$400K
per
month

$1,500
$300 $400 $500 $600 $700 $800

Cost of Acceleration (000s/month)