Consider the following decision table, which was developed for a project selecti
ID: 3396460 • Letter: C
Question
Consider the following decision table, which was developed for a project selection committee at Red Ball Enterprises.
Decision
Probability
0.2
0.5
0.3
Alternatives
Low
Medium
High
A
$ 45
$ 110
$ 67
B
$ 40
$ 64
$ 75
C
$ 65
$ 80
$ 77
D
$55
$ 80
$ 78
E
$ 75
$ 70
$ 85
Which decision alternative maximizes the expected value of the payoff? (Points : 30)
Decision
Probability
0.2
0.5
0.3
Alternatives
Low
Medium
High
A
$ 45
$ 110
$ 67
B
$ 40
$ 64
$ 75
C
$ 65
$ 80
$ 77
D
$55
$ 80
$ 78
E
$ 75
$ 70
$ 85
Explanation / Answer
expected value E(X) = X1*P(X1)+X2*P(X2)+.....+XN*P(XN)
HERE WE HAVE TO GET THE MAXIMUM PAYOFF WHICH MEANS WE HAVE TO CHOOSE THE COMBINATION OF 3 WHICH CAN GIVE US THE MAXIMUM PAYOFF
SO THE COMBINATION WHICH WILL GIVE MAXIMUM PAYOFF = 0.2*E + 0.5*A +0.3*D
= 0.2*75 + 0.5*110 +0.3*78 = 95.9