A nuclear power company in California is deciding on two possible locations for constructing a new nuclear power plant. Let's call the possible locations A and B. The nuclear disaster in Japan has made the nuclear power company very aware of the potential damage to nuclear power plants due to natural disasters. The cost of building the nuclear power plant is estimated as $15 million at A and $25 million at B.
If the company builds at A and an earthquake occurs near A within the next 5 years, construction will be terminated, and the company will lose $10 million in construction costs. At that point, the power company will have to begin building at site B, which is not in an earthquake zone. The company initially feels that there is a 20% chance that a small-to-medium earthquake could occur within 5 years. For $1 million dollars, the power company can hire a notable geologist and his rm to analyze the fault structure at site A. The geologist's analysis will predict that an earthquake either will or will not occur within 5 years. The geologist's past record indicates he is quite accurate, having predicted an earthquake on 95% of the occasions for which an earthquake took place and 90% of the occasions for which an earthquake did not take place. Build a decision tree to assist the nuclear power company make a decision among its alternatives.