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Question3 Oil company Black Hole is considering drilling a well in a remote area of Alberta. The cost of drilling is $ 70,000. This amount
Question3 Oil company Black Hole is considering drilling a well in a remote area of Alberta. The cost of drilling is $ 70,000. This amount will be lost if the well is "dry". Otherwise, the well will be qualified as "wet "If it contains a little petroleum or" quench "if it contains a lot. The gross income associated with a wet well is $ 220,000 ($ 150,000 if we subtract the cost of drilling) and that associated with a well quenching is $ 670,000 ($ 600,000 if you subtract the cost of drilling). We consulted the company's geologist, Diane Martin, to estimate the probabilities for each of the above events ("dry", "wet", "soak"). She mentions that such probabilities depend on the schistic structure under the drilling site. If this structure forms a dome, the chances that one draws oil from it are significantly higher than if such a dome does not exist. Mrs. Martin estimates at 60% the probability of the shistic structure forming a dome at the location under which Black Hole plans to drill. She also estimated the following probabilities for each of the events, conditional on the presence or absence of a dome. Drilling result presence of a dome absence of a dome dry well 0,60 0,85 wet well 0,25 0,125 soaked well 0,15 0,025 Finally, Ms. Martin suggests that Trou Noir consider doing a seismic test on the site before start drilling. This test would cost $ 10,000 and would better estimate the presence of a dome, without ensuring 100% its presence or absence. It assesses the reliability of this test with the following conditional probabilities: Pr (Test indicates "Dome" | Presence of a dome) = 0.90 Pr (Test indicates "No dome" | Presence of a dome) = 0.10 Pr (Test indicates "Dome" | Absence of a dome) = 0.20 Pr (Test indicates "No dome" | No dome) = 0.80 Draw and solve the decision tree to help Black Hole develop a strategy that maximizes| its Question3 Oil company Black Hole is considering drilling a well in a remote area of Alberta. The cost of drilling is $ 70,000. This amount will be lost if the well is "dry". Otherwise, the well will be qualified as "wet "If it contains a little petroleum or" quench "if it contains a lot. The gross income associated with a wet well is $ 220,000 ($ 150,000 if we subtract the cost of drilling) and that associated with a well quenching is $ 670,000 ($ 600,000 if you subtract the cost of drilling). We consulted the company's geologist, Diane Martin, to estimate the probabilities for each of the above events ("dry", "wet", "soak"). She mentions that such probabilities depend on the schistic structure under the drilling site. If this structure forms a dome, the chances that one draws oil from it are significantly higher than if such a dome does not exist. Mrs. Martin estimates at 60% the probability of the shistic structure forming a dome at the location under which Black Hole plans to drill. She also estimated the following probabilities for each of the events, conditional on the presence or absence of a dome. Drilling result presence of a dome absence of a dome dry well 0,60 0,85 wet well 0,25 0,125 soaked well 0,15 0,025 Finally, Ms. Martin suggests that Trou Noir consider doing a seismic test on the site before start drilling. This test would cost $ 10,000 and would better estimate the presence of a dome, without ensuring 100% its presence or absence. It assesses the reliability of this test with the following conditional probabilities: Pr (Test indicates "Dome" | Presence of a dome) = 0.90 Pr (Test indicates "No dome" | Presence of a dome) = 0.10 Pr (Test indicates "Dome" | Absence of a dome) = 0.20 Pr (Test indicates "No dome" | No dome) = 0.80 Draw and solve the decision tree to help Black Hole develop a strategy that maximizes| its
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