Exercise #2: {14 points) You own some land in the Finger Lakes region and you have three options: build a winery, mine minerals, or sell the property. If you build a winery the initial cost is $3M, if you mine minerals in the initial cost is $1M, and if you sell the land you will make $0.1 M. one of your friends is a geologist and estimates that the probability of there being minerals to extract is 0.75, but if you have the minerals your neighbor does as well. If there are no minerals, the winery would make $13M in revenue. If there are no minerals the mine would have no revenue. If there are minerals, your mine will make $3M in revenue. If you built the winery when there are minerals your neighbor will eventually mine his land, the quality of the location will be degraded, and you must repurpose your land into a petting zoo with $0.2 M in revenue. Assume all payouts have been discounted to the present. Note: Revenue Cost = Prot. CEE 5980 Introduction to Decision Analysis Assignment ii 3 Due Oct 5 REED 2 a) Draw the decision tree. What option should you choose based on expected value? (4 points) b) A consulting geologist has a patent on a test to determine the likelihood that there are minerals present on your land. The probability of the test returning HIGH given minerals present is 0.76. The probability of the test returning HIGH given no minerals present is 0.12. The consultant will charge $0.5M for the test. Structure a decision tree. What decision should you make based on expected value? (10 points)