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vivian is deciding whether or not prepare a tender for a job. The cost of producing tender will be $1300, which will apply even if
vivian is deciding whether or not prepare a tender for a job. The cost of producing tender will be $1300, which will apply even if her company does not win the tender. Vivian has done some quick calculations and currently thinks that there is a 0.52 probability that the cost is $7700 and otherwise the cost is $10700. These costs do not include the cost of producing the tender. She also believes that the probability that the lowest bid submitted by any competing company will be $8800 is0.33,that the probability that the lowest bid submitted by any competing company will be $15200 is 0.21 and otherwise will be $12600. Vivian is considering whether she should bid $10800, bid $14000 or not bid. You may assume independence between the probabilities that Vivian assigns to her estimated costs of the project and the probabilities of her assumed lowest bids of competing companies. Thus if she submits a price of $14000 then the probability that they will make the maximum profit ($14000-$7700-$1300=$5000) is P(winning)* P (low cost)= 0.21*0.52 . Draw a decision tree that represente this situation and show all EMVs and probabilities. Indicate selection of decision options with probability =1 for preferred
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