A construction manager wanted to evaluate the options for a project objectively based on the expected monetary value (EMV). The company can either expand at site A (RM6 million construction cost) OR site B (RM10 million construction cost) - Project A has favourable outcome 60% with RM15 million estimated profit and unfavourable 40% chance of RM2 million estimated profit. - Project B has a favorable outcome of 70% RM30 million estimated profit and unfavourable 30% chance of RM6 million estimated profit.
a) As a consultant, explain to the construction manager the benefits of using a decision tree to determine EMV.
b) Based on this scenario (draw a decision tree with EMV), state your recommendation to the construction manager.
SOLUTION : -
A decision tree is a diagram represenation of possible solutions to a decision.shows defferent outomes from a set of decisions. The diagram is a widely used decision- making tool for a analysis and planning.
Advantages of Decision tree:
A construction manager wanted to evaluate the options for a project objectively based on the expected...
A contractor is deciding between submitting a bid for either a highway or a dam project (he cannot submit bids for both). The estimated bid price for the highway job is $1.5M (million), that for the dam is S3M. Cost for preparing a bid is 2% of the bid price, and estimated net profit is 10% of the bid price. The contractor estimates there is 70% chance to win the highway job, but only a 50-50 chance for getting the...
MULTIPLE-CHOICE questions E1-1.ABC Engineering use cost method to cart engineering use cost method to calculate the stage of completion of its construction act. Total estimated contract costs of their contract are $100 million. In the first year of their contract, ABC Engineering has incurred the following costs: Cost of purchase of raw materials worth $10 million ($5 million of which are unused by the year end) 2. Payment of salaries and wages of $5 million ($1 million of accrued salaries...
TORENTO CONSTRUCTION: ETHICAL CONTRACTING On December 27, 2010, Cary Holmes, manager of the Supply Chain Management (SCM) group at Torento Construction Inc. (NCG), was in his office in Torento, Ontario, trying to organize the thoughts running through his head as a result of a recent bidding to save operating costs at NCG. There was no problem in terms of the final outcome; in fact, the bid was going to result in cost savings of 25 per cent, which was exactly...