Use TreePlan to solve this problem in Excel and submit your Excel spreadsheet here Use TreePlan to s

Use TreePlan to solve this problem in Excel and submit your Excel spreadsheet here

Use TreePlan to solve this problem in Excel and submit your Excel spreadsheet here

Use TreePlan to solve this problem in Excel and submit your Excel spreadsheet hereUse TreePlan to solve this problem in Excel Develop new process Profit ($1,000,000s) Probability Outcomes $600 Great success

. The Americo Oil Company is considering making a bid for a shale oil development contract to be awarded by the federal government. The company has decided to bid $112 million. The company estimates that it has a 60% chance of winning the contract with this bid. If the firm wins the contract, it can choose one of three methods for getting the oil from the shale. It can develop a new method for oil extraction, use an existing (inefficient) process, or subcontract the processing to a number of smaller companies once the shale has been excavated. The cost of preparing the contract proposal is $2 million. If the company does not make a bid, it will invest in an alternative venture with a guaranteed profit of $30 million. Construct a sequential decision tree for this decision situation and determine whether the company should make a bid.

The results from these alternatives are as follows

Use TreePlan to solve this problem in Excel Develop new process Profit ($1,000,000s) Probability Outcomes $600 Great success 30 Moderate success .60 300 Failure 10 -100 Use present process: Profit ($1,000,000s) Outcomes Probability .50 $300 Great success Moderate success 30 200 Failure 20 -40 Subcontract: Profit ($1,000,000s) Outcome Probability Moderate success 250 1.00

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