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Homework answers / question archive / From the decision tree branch shown, determine the expected values of the two outcomes it decision D3 is already selected and the maximum outcome value is sought

From the decision tree branch shown, determine the expected values of the two outcomes it decision D3 is already selected and the maximum outcome value is sought

Economics

From the decision tree branch shown, determine the expected values of the two outcomes it decision D3 is already selected and the maximum outcome value is sought. (This decision branch is part of a larger tree) 10 DO Probability 0.4 0.3 0.3 0.6 0.4 When the probability is 0.4, the value is $58 When the probability is 0.3, the value is $29 When the probability is 0.3, the value is $19.
Dave Exit 4 V. 10 Soints D3 eBook 0.6 Hint Print References 0.4 When the probability is 0.4, the value is $58. When the probability is 0.3, the value is $-29. When the probability is 0.3, the value is $19. When the probability is 0.6, the value is $-9. When the probability is 0.4, the value is $6. The expected value of the the top node is $ The expected value of the bottom node is $ Enode is selected. The Click to select) bottom top

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Expected value of top node is $20.2

Expected value of bottom node is -$3

The top node is selected

Explanation:-

Compute expected value of nodes

Expected value of top node = (0.4 * 58) + (0.3 * (-$29)) + (0.3 * $19)

                                         = $23.2 - $8.7 + $5.7 = $20.2

Expected value of top node is $20.2

Expected value of bottom node = (0.6 * (-$9)) + (0.4 * $6)

                                         = -$5.4 + $2.4 = -$3

Expected value of bottom node is -$3

The top node is selected