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Decision Tree

A decision tree is a graphical tool used to represent various decisions, their probabilities, and expected outcomes, aiding in evaluating alternatives and associated risks. The document provides examples of expected values for different decisions labeled A through F, illustrating their potential financial impacts. Additionally, it briefly describes simulation as a method for modeling real-world systems to analyze behavior under varying conditions.

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harveywoods678
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5 views16 pages

Decision Tree

A decision tree is a graphical tool used to represent various decisions, their probabilities, and expected outcomes, aiding in evaluating alternatives and associated risks. The document provides examples of expected values for different decisions labeled A through F, illustrating their potential financial impacts. Additionally, it briefly describes simulation as a method for modeling real-world systems to analyze behavior under varying conditions.

Uploaded by

harveywoods678
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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DECISION TREE

Definition
A decision tree is a graphical representation of different possible
decisions, their associated probabilities, and the expected outcomes. It is
commonly used in decision-making processes to evaluate various
alternatives and their potential risks and rewards.
Decision Tree
Example
Solution
Expected values
A (2/3 X 13.5M) + (1/3 X 6.5M) = 11.17M 11.17-4=7.17M Expensive
B (2/3 X 8.5) + (1/3X 4M) =7M 7-2=5M Cheap
C (0.91 X 13.5)+ (0.09 X 6.5M) =12.87M
D (0.91 X 8.5) + (0.09 X 4M) =8.095M
E (0.13 X 8.5)+ (0.87 X 4M) =4.585M
F 12.87-4=(8.87 X (0.32 X 5) =7.631M 7.6316M- Market Research
0.68)= 6.0316+ 0.2=7.4316
5 Shut down
SIMULATION
Simulation is the process of creating a model or representation of a real-
world system, process, or environment to analyze its behavior under
different conditions. It allows for experimentation and testing without
directly affecting the actual system.

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