Answered step by step
Verified Expert Solution
Question
1 Approved Answer
PLEASE HELP I DONT UNDERSTAND HOW TO DO A AND B. Decision tree question, please explain with steps also. nobody is answering this question i
PLEASE HELP I DONT UNDERSTAND HOW TO DO A AND B. Decision tree question, please explain with steps also. nobody is answering this question i tried 5 times please help :(
A 9.32. The executive search being conducted for Western Bank by Headhunters Inc. may finally be bearing fruit. The position to be filled is a key one-Vice President for Information Processing-because this person will have responsibility for developing a state-of-the-art management information system that will link together Western's many branch banks. However, Headhunters feels it has found just the right person, Matthew Fenton, who has an excellent record in a similar position for a mid-sized bank in New York. After a round of interviews, Western's president believes that Matthew has a probability of 0.7 of designing the management information system successfully. If Matthew is successful, the company will realize a profit of $2 million (net of Matthew's salary, training, recruiting costs, and expenses). If he is not successful, the company will realize a net loss of $600,000. For an additional fee of $40,000, Headhunters will provide a detailed investigative process (including an extensive back-ground check, a battery of academic and psychological tests, etc.) that will further pinpoint Matthew's potential for success. This process has been found to be 90 percent reliable, that is, a candidate who would successfully design the management information system will pass the test with probability 0.9, and a candidate who would not successfully design the system will fail the test with probability 0.9. Western's top management needs to decide whether to hire Matthew and whether to have Headhunters conduct the detailed investigative process before making this decision. a) Use the likelihoods/conditional and prior probabilities to calculate all the posteriors/revised probabilities. Show your work/calculations. (6 points) b) Draw a decision tree for this problem that will help Western's top management decide whether to hire Mathew and whether to have Headhunters conduct the detailed investigation process before making this decision. Solve the decision tree and determine the optimal decision strategy and its expected payoff. (Show your work/calculations). Verbally communicate the decision strategy. (25 points) c) Now suppose that the Headhunters's fee for administering its detailed investigative process is negotiable. What is the maximum amount that Western Bank should pay? Show your work/calculations. (3 points)Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started