Please help with the process, I am extremely lost in this process.

Ventron Engineering

The Ventron Engineering Company has just been awarded a development contract by the U.S. Army Aviation Systems Command to design, develop, and demonstrate critical components of a new rotor system. The system will be part of the Heavy Lift Helicopter program, which is currently receiving much attention in the industry.

An integral part of the rotor system is blade spar. The blade spar is a metal tube that runs the length of and provides strength to the helicopter blade. Due to the unusual length and size of the Heavy Lift Helicopter blade, Ventron is unable to produce a single-piece blade spar of the required dimensions using existing extrusion equipment and material.

The engineering department has prepared two alternatives for developing the blade spar: sectioning or an improved extrusion process. Ventron must decide which process to use. The risk report prepared by the engineering department is shown in Exhibit 1.

Sectioning This process involves joining several shorter lengths of extruded metal into a blade spar of sufficient length. This work will require extensive testing and rework over a 12-month period at a cost of $150,000 per month. While this process will definitely produce an adequate blade spar, it merely represents an extension of existing technology.

Extrusion In order to extrude the blade spar as a single piece, it will be necessary to modify the extrusion press at a monthly cost of $160,000 and to improve the material used at a monthly cost of $50,000. Each of these steps would require six months of steady work.

If successful, this process would produce a blade spar of superior quality at a lower overall cost. Unfortunately, there is some risk that Ventron will be unable to perfect the extrusion process.

After studying the technical problems, the engineering department feels there is a nine-in- ten chance of perfecting the material. However, the other possibility (a one-in-ten chance) is that at the end of the six-month development effort it will know that a satisfactory material cannot be developed within any reasonable time and cost framework, and it will have to rely on sectioning.

The engineers believe there is a three-in-four chance of successfully modifying the extrusion press, but a one-in-four chance that the extrusion process will have to be abandoned at the end of a six-month press development project, because a press with the necessary capabilities will be shown to be infeasible.

Development of the blade spar must be completed within 18 months in order to avoid holding up the rest of the contract. It has also been determined that, if necessary, the sectioning work could be done on an accelerated basis in a six-month period at a monthly cost of $400,000.

The Director of Engineering, Phil Pitner, is most interested in the opportunity provided by this contract to explore new technology in the extrusion process. He feels that if Ventron is successful in producing the single-piece blade spar, the company?s reputation in the field will be greatly enhanced. In addition, an improved extrusion process would allow the company to complete development of the blade spar well under budget.

After a preliminary review of the problem, Ventron?s President, Allison Candell, has not yet reached a final decision. Like Dr. Pitner, she is intrigued by the possibility of successfully developing the extrusion process. She feels that this would give Ventron an excellent chance at some additional contracts. However, she is concerned about the possibility of wasting money on unsuccessful development or of being forced to do sectioning on an accelerated basis.

Ventron?s contract with the Army is for a fixed total amount spread over several years. Candell wants to minimize the expenditures on the blade spar portion to free up money for technical development on other components of the rotor system, which would improve Ventron?s position for future business, both defense and commercial.

Please assist me and help explain the following

Construct a decision tree in TreePlan

Find the solution with the least expected cost

Add a bonus value (in dollars) to the endpoints of the tree, where both developments are successful

Conduct a sensitivity analysis on that bonus value and find the break-even point, where the bonus makes the developments worth while