A swim club is designing a new pool to replace its old pool. The new pool would
Question:
A swim club is designing a new pool to replace its old pool. The new pool would need to last for 10 years since the club is planning on relocating after 10 years. A concrete shell would cost $100,000 and last for all 10 years. Another option is to install a vinyl liner that would cost only $75,000 to install. However, the vinyl is not guaranteed to last for all 10 years, and has a 33% chance of breaking down. Repair of the vinyl would cost $40,000 and would extend the life of the vinyl liner to the 10 year mark. If both options are acceptable to the swim club, which one minimizes their cost? (10 marks – 5 marks for drawing decision tree, 5 marks for EMV calculation and correct suggestion of what to do)
Essentials of Business Analytics
ISBN: 978-1285187273
1st edition
Authors: Jeffrey Camm, James Cochran, Michael Fry, Jeffrey Ohlmann , David Anderson, Dennis Sweeney, Thomas Williams