Problem Statement :

You are managing a project that will produce navigation system for Tesla's e-car. 1000 units of a new circuit is required for the project.

During the risk response planning, the project stakeholders have agreed to either accept the risk of production (the project team will produce the circuit board/chipset) or transfer the risk of production (purchase the circuit-board/chipset from Galactic).

The following information is gathered:

Production of Chipset by the project team

o"Start-up" costs (fixed plus production costs) $100,000.

oProbability of 0.40 that the production will succeed

oProbability of 0.60 that the production will fail. If the production fails, the project team will have to re-evaluate the situation and decide whether to try all over again.

If the team decides to try all over again:

oThe project must incur the "start-up" costs plus it must spend an additional $100,000 to redesign the chipset.

oThe probability of success is estimated to be 0.90.

oThe probability of failure is estimated to be 0.10. If failure occurs, the chip must be purchased from an outside vendor.

Purchasing the chipset from Galactic .

The project must pay the vendor $100,000 in development costs plus $50 per chipset.

Draw a Decision Tree Diagram and label it appropriately.........10points

You must be answer the below two question

1.What is the best decision that the project can make? Why ? ...3points

2. What is the worst that can happen to the project in managing the Chipset production risk? Why?.....2points