Constructing Decision Trees: A Business Case Study

Constructing Decision Trees: A Business Case Study

Assessment

Interactive Video

Business

University

Practice Problem

Hard

Created by

Wayground Content

FREE Resource

The video tutorial explains how to construct decision trees using a business scenario where a company must decide whether to invest £10,000 to increase the probability of capitalizing on a £100,000 breakthrough. It covers decision nodes, chance nodes, and the calculation of probabilities and payoffs. The tutorial concludes with determining the optimal decision based on expected outcomes.

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7 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the main decision the business faces in the context of the decision tree?

Whether to invest £10,000 to increase success probability

Whether to expand the business internationally

Whether to change the business model

Whether to hire more employees

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What are the two decision branches emanating from the decision node?

Increase marketing budget or reduce costs

Expand internationally or stay local

Invest £10,000 or not invest

Invest £10,000 or hire new staff

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the probability of success if the business decides to invest?

30%

50%

60%

70%

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the probability of failure if the business does not invest?

40%

50%

70%

60%

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the final payoff if the business successfully capitalizes on the breakthrough?

£75,000

£100,000

£150,000

£50,000

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the expected outcome if the business fails to capitalize on the breakthrough?

£0

£100,000

£10,000

£50,000

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

How does the business determine the optimal decision using the decision tree?

By choosing the decision with the least cost

By comparing the expected gains from each decision

By following industry trends

By selecting the decision with the highest risk

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