Question

1. Verify Dante’s profit projections shown at the ending branches of the decision tree by calculating the payoffs of $2,650,000, $650,000, and $1,150,000 for first three outcomes? I provided belwo how the result of the first two outcomes where they came from. But I don't where $1,150,000 came from? I need your help verifying and Correcting the calculation for the three payoffs.  Can please show me who you got that step by step and where it came from?

IF Demand is High

  • Estimated income that results from building the complex=$5,000,000
  • The cost of preparing the bid is $200,000
  • Amount that company have to pay if it wins the bid = $2,000,000
  • The cost of this study = $150,000

So, the profit projection at the ending branch of nods 8

=5,000,000-200,000-2,000,000-150,000

=$2,650,000

IF Demand is Moderate:

  • Estimated income that results from building the complex=$3,000,000
  • The cost of preparing the bid is $200,000
  • Amount that company have to pay if it wins the bid = $2,000,000
  • The cost of this study = $150,000

So, the profit projection at the ending branch of nods 8

=3,000,000-200,000-2,000,000-150,000

=$650,000

 

 

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