m1 79 Acquiring a New Machine 239 Therefore, the test will be run. If it is positive, the product will be sold; if it is negative, the product will be scrapped. (c) How much money is the firm willing to pay per test at the most? Up to 14.02 - 12 = 2.02. 7.10 Wine Tasting Shane and Peter are two friends who are very keen on oenology. Peter has invited Shane to his house and has decided on a bet: Peter has randomly chosen one bottle from the wall of his wine cellar, where there are around 700 bottles of Rioja wines and some 300 bottles of Ribera del Duero wines, and he has filled a wine glass with the chosen wine. If Shane correctly identifies Peter's wine, he must pay Shane $8, but if Shane fails, he must pay Peter $10. Shane can try to guess which wine it is without smelling it or tasting it. He also has the option of smelling the wine if he pays $2 to Peter. Having smelt the wine, he can try guessing the type of wine, or can even taste it by paying Peter $2. Shane estimates that the probability of succeeding by smell if it is a Rioja wine is 85 %, but this drops to 70 % for a Ribera del Duero wine. However, he also estimates that the probability of success when tasting a Rioja wine is 75 %, but it is 85% for a Ribera del Duero wine. (a) Draw the corresponding decision tree and indicate with a letter per branch the associated probability or the associated cost (depending on the case) (b) Solve the tree. What strategy should Shane adopt