Company SBPA is considering whether to overhaul a machine that can be used for another year. The cost of an overhaul is $5,000. If the machine fails in operation, lost production will be $8,000. Assume that the machine will not fail during next year if it is overhauled. Please formalize the problems in decision tree models, show your decision trees 

(1) If the probability that the machine fails, if not overhauled, is 0.6, should we decide in favor of the overhaul?

(2). It is possible that an engineering consulting team performs a test on the machine, whose results will enable you to predict with greater accuracy whether or not the machine will fail. The test is imperfect. Based on historical data, it correctly predicts the machine's Failure/No_failure 90% of the time. What is your strategy now? How much you are willing to pay for the test, given that you decide to hire the consulting team?

Answer rating: 100% (QA)

Lets formalize the decision tree models for both scenarios Scenario 1 If the probability that the machine fails if not overhauled is 06 and the cost o... View the full answer