Hello Experts-

I need help with the following question. Can you please be as clear and detail as possible with step by step instructions and show your work (with formulas if possible), so I can follow along . I want learn not the material not just copy what you wrote. Thank you in advance for your help and understanding!

Ouestion:

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.

Complete the following tasks:

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

(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.

(4) Generate the risk profile for the decision tree. The risk profile only includes the Cumulative Chart.

(5) Explain which optimal decision strategy should be chosen based upon the results from (3) and (4).

Probability Payoff Millions Level of Success Dogs Gone w/ Snow Dogs Gone w/ Snow S5 $25 0.4 0.3 Hit $4 $15 Moderate Success 0.3 0.3 $2 $2 Light Success 0.3 0.2 $0.50 $0.75 Flop 0.1 0.1