Problem 2. Decision analysis (4 points, use of Excel is optional) Your company SIMFlight is considering bidding for building a flight simulation laboratory for a university. The cost to construct the lab will be $500,000 and it will cost $10,000 in preparing for the bid in work time and material. From your experience, you have made the following estimates on the winning probabilities for four different levels of bids under considerations: Bid number 1 2 Bidding amount Construction cost + 5% Construction cost + 10% Construction cost + 15% Construction cost + 20% Winning probability 0.80 0.60 0.40 0.20 3 4 a. Show a decision tree for the bidding analysis (by hand or in Excel) (1 point) b. What is the optimal bid if you want to maximize the expected profit? What is the expected profit under the optimal bid? (1 point) c. What is the risk profile for the optimal bid? (1 point) d. Consider the winning probability in the optimal bid. How much can it change without altering the optimal bid if all other parameters are kept the same? (1 point)