Fred owns a theater company on Broadway. The company is deciding on two alternative plays for production. The first play, Dogs, would cost much less than the other alternative, Gone with the Snow. Dogs could be produced for $2 Million, while Gone with the Snow would take $4 million to produce. However, Gone with the Snow, is an epic production that could run many times longer than Dogs. The following table shows the probability and the payoff.

	Probability		Payoff Millions
Level of Success	Dogs	Gone w/Snow	Dogs	Gone w/Snow
Hit	0.3	0.4	$5	$25
Moderate Success	0.3	0.3	$4	$15
Light Success	0.3	0.3	$2	$2
Flop	0.1	0.1	$0.50	$0.75

Complete the following tasks:

(1) Construct a decision tree to capture the above scenario.

Note that your tree should include the following considerations if any:

Use the negative sign (-) for the cost, the expenses, cash outflow, etc.

Use the positive sign (+) for the revenue, profit, cash inflow, etc.

Your tree will be able to generate the Cumulative Chart that includes the curves of all the possible decision strategies.

(2) Write down the number of decision strategies that you can find from your tree.

(3) Write down the expected return for each decision strategy.

Answer rating: 100% (QA)

Answer Decision tree Joh given Scenario Hit Moderate ... View the full answer