Critical Thinking Essay: Reliability And Decision Theory

The topic is a shown below:
The supplement to Chapter 5 in your textbook describes and develops several decision trees. Address the following requirements:

  • Develop a decision tree for the case described.
  • Explain the process of developing a  decision tree, draw the decision tree (include the decision tree in an  appendix showing chance nodes, probabilities, outcomes, expected values,  and net expected value).
  • Defend your final decision based on your decision tree.

Case for consideration—An operations manager for a cereal producer is faced with a choice of:

  1. A large-scale investment (A) to purchase a new cooker which could  produce a substantial pay-off in terms of increased revenue net of costs  but requires an investment of 3,750,000 Saudi Riyal. After extensive  market research it is thought that there is a 40% chance that a pay-off  of 9,375,000 Saudi Riyal will be realized, but there is a 60% chance  that it will be only 3,000,000 Saudi Riyal.
  2. A smaller scale project (B) to refurbish an existing cooker. At  1,875,000 Saudi Riyal, this option is less costly but produces a lower  pay-off. Again, extensive research data suggests a 30% chance of a gain  of 3,750,000 Saudi Riyal but a 70% chance of it being only 1,875,000  Saudi Riyal.
  3. Continuing the present operation without change (C) which cost nothing, but produces no pay-off.

Directions:
-Write an essay that includes an introduction paragraph, the essay’s body, and a conclusion paragraph to address the assignment’s guide questions. Do not address the questions using a  question-and-answer format.
-APA style should be used-Font will be: Times roman 12, and double space should be between lines
-At least 3-4 scholarly, peer-reviewed journal articles will be used as references (including the below two).

Recommended Reference:
– Kaminski,  B., Jakubczyk, M., & Szufel, P. (2018). A framework for  sensitivity analysis of decision treesCentral European  Journal of Operations Research26(1),  135–159.

– Nor, S. H. S., Ismail, S., & Yap, B. W. (2019). Personal bankruptcy prediction using decision tree modelJournal  of Economics, Finance & Administrative Science24(47), 157–172.

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