18 Questions
What is the probable outcome of success for Project Redlands?
$12m
If Project Redlands fails, what is the forecast earnings in sales revenue?
$11m
What is the total probable outcome for Project Redlands?
$14.75m
What is the probable profit from Project Redlands?
$4.75m
Why is Project Widmore not chosen according to the text?
Higher expected return on investment
What advantage do decision trees offer as a planning tool?
Visual representation of different decisions and choices
What qualitative factors do decision trees ignore?
All of the above
Why can predicted outcomes in decision trees still be unknown?
Due to changes in the external business environment
How does the use of decision trees impact risk reduction?
It does not necessarily reduce risks
Why might it be challenging to construct a decision tree for complex decisions?
Due to numerous interconnected options
In the context of the home baker's decision, what can affect the validity of the decision tree over time?
Changes in market research data
For the home baker, which aspect could contribute most to making a decision between a mid-range home kitchen and a top-end professional kitchen?
Return on investment analysis
What does a square represent in a Decision Tree diagram?
A decision node
In a Decision Tree, what does a circle represent?
A probability node
How is the probable return on investment calculated in the context of the examples provided?
$17.025m - $13m
What do cross outlines in a Decision Tree indicate?
Rejected options based on quantitative reasoning
If a project has a 75% chance of success with sales revenue of $16 million, what is the likely outcome?
$16m × 0.75
Based on the examples provided, why is Project Redlands considered more favorable than Project Widmore despite having lower sales revenue?
Higher probability of success
Learn how to calculate the probable profit for Project Redlands based on different success probabilities and sales revenues. Understand the financial outcome of the project including expected earnings and costs.
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