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A group of medical professionals is considering the construction of a private clinic. If the medical...

A group of medical professionals is considering the construction of a private clinic. If the medical demand is high (i.e., there is a favorable market for the clinic), the physicians could realize a net profit of $100,000. If the market is not favorable, they could lose $40,000. Of course, they don’t have to proceed at all, in which case there is no cost. In the absence of any market data, the physicians’ best guess is that there is a 50–50 chance the clinic will be successful. Construct a decision tree to help analyze this problem. What should the medical professionals do?

I need to use excel QM to solve this problem and would like to see step-by-step instructions on constructing the Decision Tree so I can create it for myself. Please use excel QM to solve this problem. Greatly appreciated

math   Statistics-And-Probability   
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Answer #1

ANSWER:-\\\\ Given\,\,that\\\\

Consider a group of medical professionals is considering the construction of a private clinic.

If the medical demand is high (i.e., there is a favorable market for the clinic), the physicians could realize a net profit of $100,000.

If the market is not favorable, they could lose $40,000.

The\,\,construction\,\,of\,\,a\,\,private\,\,clinic\\\\\\ The\,\,alternative\,\,of\,\,the\,\,decision\,\,node\,\,is\,\,to\,\,construct\,\,private\,\,clinic.\\\\\\ The\,\,state\,\,nature\,\,node\,\,1.\\\\\\ The\,\,favorable\,\,market\,\,is\\\\ \,\,\,\,(0.5)*100,000=50,000.\\\\\\ Not\,\,a\,\,favorable\,\,market\\\\ (0.5)*(-40,000)=-20,000\\\\\\ The\,\,state\,\,of\,\,nature\,\,to\,\,do\,\,nothing\,\,is\,\,\$\,0\\\\\\ To\,\,solve\,\,the\,\,expected\,\,monetary\,\,values\,\,(EMVs)\,\,for\,\,each\,\,state\,\,of\,\,nature\,\,node.\\\\\\ The\,\,EMV\,\,for\,\,node\,\,1\\\\ \$50,000-\$20,000=\$30,000\\\\\\ The\,\,state\,\,of\,\,nature\,\,node\,\,with\,\,the\,\,highest\,\,EMV\,\,should\,\,be\,\,chosen.\\\\\\ Construct\,\,a\,\,a\,\,private\,\,clinic\,\,since\,\,it\,\,has\,\,\,the\,\,highest\,\,EMV\,\,and\,\,the\,\,pay\,\,off\,\,to\,\,do\,\,\,nothing\,\,is\,\,\$0.\\\\\\

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