SciTools Incorporated, a company that specializes in scientific instruments, has been invited to make a bid on a government contract. The contract calls for a specific number of these instruments to be delivered during the coming year. The bids must be sealed (so that no company knows what the others are bidding), and the low bid wins the contract. SciTools estimates that it will cost $5000 to prepare a bid and $95,000 to supply the instruments if it wins the contract. On the basis of past contracts of this type, SciTools believes that the possible low bids from the competition, if there is any competition, and the associated probabilities are those shown in the table below. In addition, SciTools believes there is a 30% chance that there will be no competing bids.

Lowest competing Bid	Probability
Less than $115,000	0.2
Between $115,001 and $120,000	0.4
Between $120,001 and $125,000	0.3
Greater than $125,000	0.1

Based on the data in the table above, SciTools will limit its choices for bids to $115,000, $120,000, and $125,000.

a) Draw a decision tree for this scenario

b) Solve this decision tree using EMV

c) Draw the risk profiles for all decision strategies

d) Draw the cumulative risk profile for this scenario. Is there dominance?

e) Construct a tornado diagram for this scenario, if we assume the following ranges for the

variables:

a. Probability of no competing bids: 0 to 0.6

b. Cost to supply the instruments: $85,500 to $105,400

c. Bid cost: $4,500 to $5,500