Quantitative Risk Analysis: Individual Project Build vs. Buy Decision

As the manager of a new website project for your company, you need to decide whether to make a new web application in-house or send the project out to a developer. The developer has quoted a project cost of $175,000. Based on previous work with this developer, you are 85 percent certain they will finish the work on time. Your in-house development team has quoted a project cost of $165,000. Based on previous work with the in-house team, you are 75 percent certain they will complete the work on time.

Make an example of a decision tree illustrating the cost and probability of each option and then identify the best decision for the project.

All calculations for each problem must be shown and include appropriate formulas and cell references. Clearly identify the answer to each problem.