Problem $4$: Risk Assessment in Construction

Scenario: A construction company faces a decision on whether to proceed with a project.

Proceed: Cost: $$500,000$; Profit: $$1,000,000$ with a $50\%$ probability; Loss: $$200,000$ with a $50\%$ probability.

Abandon: No cost$,$ no return.

Task: Build a decision tree and calculate the EMV for proceeding versus abandoning the project. What should the company do$?$

Problem $5$: Maintenance Strategy

Scenario: An engineering manager must choose a maintenance strategy for a critical machine.

Preventive Maintenance: Cost: $$30,000$ annually; $80\%$ chance of avoiding major failure costing $$200,000.$

Reactive Maintenance: No annual cost; $50\%$ chance of machine failure costing $$200,000.$

Task: Create a decision tree and analyze the costs associated with each strategy. Which maintenance approach should the manager select?