Question: The cost-to-loss ratio problem continued . The cost-to-loss ratio problem as shown in Figure 5.26 may be considered a simplified version of the actual situation.

The cost-to-loss ratio problem continued . The cost-to-loss ratio problem as shown in Figure 5.26 may be considered a simplified version of the actual situation. The protective action that may be taken may not pro-vide perfect protection. Suppose that, even with protective action, dam-age D will be sustained with probability q. Thus, the decision tree appears as Figure 5.27. Explain how sensitivity analysis could be used to determine whether it is important to include the upper chance node with probability q and damage D.

Take Protective Action No Damaec 1-9) Loss L. Take No Action No Loss 1-P)

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