EnerCom has a possibility to present a proposal for two important contracts. The deadlines and preparation costs for both proposals are the following:

	Contract 1	Contract 2
Preparation cost	$5 000	$10 000
Deadline for presentation	June 1st	August 1st
Announcement of the winner	July 1st	September 1st

EnerCom can realize only one of the two contracts (thus, if EnerCom obtains the first contract, it will not be allowed to present a proposal for the second contract). However, since it takes two months for preparing a proposal, EnerCom must decide immediately which one(s) of the proposal to prepare in order for them to be ready in time (nevertheless, the decision on the level of the proposal can be delayed until the last minute).

For each of the contracts, EnerCom is considering two possible levels. The following table presents, as a function of these levels, the expected profits and an estimation of the probability of obtaining the contract.

	Contract 1		Contract 2
	Profit	Probability	Profit	Probability
Level 1	$50 000	0.5	$100 000	0.3
Level 2	$70 000	0.3	$150 000	0.1

Question 1: Represent the problem of EnerCom as a decision tree and find the optimal strategy for EnerCom if the criterion is to maximize net expected profit. Find the value of a perfect information on the amount of the lowest proposal of the competitors for Contract 1 (suppose that EnerCom would obtain the contract if it were to bid an amount exactly equal to the lowest proposal).

There is not other additional information. This is all what is given in the Question. There are other Parts to this question but it will not affect the answer to Question 1.

https://www.chegg.com/homework-help/questions-and-answers/enercom-possibility-present-proposal-two-important-contracts-deadlines-preparation-costs-p-q46594533

These are Comments from the Professor:

1. Dates are important. You can only prepare one contract, both contracts or none at all at the beginning.

2. Perfect information is someone opening the envelope and telling you (knowing in advance) if you are winning or not.

3. Specify the date that you get this information, not on announcement date. It makes a difference when you get this information. It has no value if you get the information at announcement date, so compute that early.