Question
1. Use the following information below to decide whether you should build the application in-house or outsource it. Pick the decision with the lower investment
1. Use the following information below to decide whether you should build the application in-house or outsource it. Pick the decision with the lower investment required:
Cost to build application in-house $95,000
Cost to outsource the task of developing the application $80,000
Probability of passing user acceptance testing if built in-house 90%
Probability of passing user acceptance testing if work is outsourced 30%
Cost of rework after user acceptance testing if built in-house $50,000
Cost of rework after user acceptance testing if work is outsourced $25,000
2. What would a decision tree look like to show outcomes for each decision node using the SilverDecisions website (http://silverdecisions.pl/SilverDecisions.html?lang=en
(Links to an external site.)
). Note: While the SilverDecisions tool is intuitive, you can find a manual athttp://silverdecisions.pl/
(Links to an external site.)
.
Based on your calculation of the expected value of each outcome, tell us what decision you'd make (and why).Be sure to tell us why you did not choose the other options.
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