Calculate the expected cost


Please help with the following problem. Provide the answer in an Excel sheet.

Designing a shaft support has two options: using a pair of single row ball (SRB) bearing with a purchasing cost of $25, or using a pair of cylindrical roller bearing (CRB) with a purchasing cost $70. If selecting SRB, it will fail (within a specified life) with a probability 25%, and when it fails, it can fail in three forms (failure modes): failure in mode 1 (m1) with a chance of 0.2, in mode 2 (m2) 0.5, and in mode 3 (m3) 0.3. The damaging cost depends on the failure mode: $40 for failure in m1, $50 in m2, and $30 in m3. Assuming that when using CRB, the chance of failure is zero. Develop a decision tree for the problem, calculate the expected cost of each decision option and identify the best option.

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Finance Basics: Calculate the expected cost
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