Create suitable decision tree to make suitable decision


Shamrock oil owns the parcel of land which has potential to be underground oil field. It will cost $500,000 to drill for oil. If oil exists on land, shamrock will realize the payoff of $4,000,000 (not including drill cost). With present information, shamrock evaluates that there is a 0.2 chance that oil is present on site. Shamrock also has option of selling land as is for $400,000, without further information about probability of oil being present. The third choice is to do geological test at site, that would cost $100,000. There is 30% probability that test results will be positive, after which shamrock can sell land for $650,000 or drill land, with 0.65 chance that oil exists. If test results are negative, shamrock can sell land for $50,000 or drill land, with the 0.05 probability which oil exists. a) Create suitable decision tree to make suitable decision using excel.

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Mathematics: Create suitable decision tree to make suitable decision
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