hello everyone i have a exercise about probability please help me
does anyone can help me please
The HALO bicycle light manufacturer is considering expanding; they have two options
- to expand existing production facilities
- to buy out another company which could be a bicycle light competitor or a local china manufacturer with similar production facilities
Expansion brings a 60% chance of revenue increased by £100m and a 40% chance of revenue increased by £30m (this is unlikely to cover the costs of expansion).
The chances of successful buy out are 70%, but at worst acquisition would bring increased revenues of 60Million.
To buy the glass competitor brings a 50% chance of increasing revenues by either £72m or £86m after the buy out.
Buying the china manufacture brings a 80% chance of increasing revenues to £90m or 20% chance of increasing them to £70m after the buy out.
- Construct a decision tree
- Calculate the probabilities and expected values