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An events management company is trying to decide whether or not to advertise on outdoor concert. The sale of tickets is dependent on the weather.

  1. An events management company is trying to decide whether or not to advertise on outdoor concert. The sale of tickets is dependent on the weather. If the weather is poor it is expected that 5,000 tickets will be sold without advertising. There is a 70% chance that the weather will be poor.

If the weather is good it is expected that 10,000 tickets will be sold without advertising. There is a 30% chance that the weather will be good.

If the concert is advertised and the weather is poor, there is a 60% chance that the advertising will stimulate further demand and ticket sales will increase to 7,000. If the weather is good there is a 25% chance the advertising will stimulate demand and ticket sales will increase to 13,000.

The profit expected, before deducting the cost of advertising, at different levels of ticket sales are as follows:

Number of tickets sold

Profit (RM)

5,000

(20,000)

6,000

(5,000)

7,000

35,000

8,000

55,000

9,000

70,000

10,000

90,000

11,000

115,000

12,000

130,000

13,000

150,000

The cost of advertising the concert will be RM15,000.

Required:

Draw a decision tree to demonstrate whether the concert should be advertised.

2. You are trying to decide whether to trade in your old car for a more recent model. Your usage pattern will remain unchanged, but the old and new cars use different type of petrol. State whether the following items are relevant or irrelevant to your decision.

  1. The price of the new car
  2. The price you paid for the old car
  3. The trade-in value of the old car
  4. License cost
  5. The difference between the costs of petrol

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