A Niagara, Ontario farmer must decide whether to take protective action to limit damage to his citrus
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Question:
A Niagara, Ontario farmer must decide whether to take protective action to limit damage to his citrus fruit crop in the event that the overnight temperature falls to a level well below freezing. If the temperature drops too low, he/she runs the risk of losing his/her entire citrus crop, valued at $75,000. Based on the Agriculture Weather Service, the probability of such a temperature drop is 60%. He/she can insulate the crop by spraying water on all the citrus trees, which will cost $20,000. This action might succeed in protecting the citrus crop, with the following possible outcomes:
Probability Damage
0.30 $0
0.15 $5,000
0.10 $10,000
0.15 $15,000
0.30 $20,000
Required:
- Construct a decision tree in Excel to help the farmer make his decision.
- What should she/he do? Explain the answer with the aid of a decision tree.
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