In a decision tree problem involving capacity planning, there was a random outcome node with three random outcomes (A,B, and C) which followed a decision node.The probabilities for A, B and C: P(A)=0.4, P(B) = 0.6 and P(C) = 0.2.Payoff following A,B and C respectively are $10000, $5000 and $2000.Expected value of that random outcome node is:
A)$7400
B)$7000
C)$17000
D)Cannot be determined since there is something wrong with the data given.
E)$5666.

Question

Quizplus · Accepted Answer

The probabilities given for outcomes A, B, and C do not sum to 1 (0.4 + 0.6 + 0.2 = 1.2), which is not possible for a probability distribution. Therefore, the expected value cannot be determined with the given data.

In a Decision Tree Problem Involving Capacity Planning, There Was