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    Decision Tree - Kareem Shaker Farid Draz - Assignment

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    Kareem
    The document presents a decision tree for a quantitative analysis assignment regarding whether to purchase and explore land or take no action. It analyzes the expected monetary value at each decision node based on probabilities of finding different minerals at varying percentages. The recommended decision is to conduct a 3-day test at node 3, as it has the highest expected monetary value of $2,400,000 compared to other options. Now a company offers to pay half costs for half revenues; the recommendation is to accept, to share risk while still gaining from potential revenues.

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    Decision Tree - Kareem Shaker Farid Draz - Assignment

    Uploaded by

    Kareem
    19 views5 pages
    The document presents a decision tree for a quantitative analysis assignment regarding whether to purchase and explore land or take no action. It analyzes the expected monetary value at each decision node based on probabilities of finding different minerals at varying percentages. The recommended decision is to conduct a 3-day test at node 3, as it has the highest expected monetary value of $2,400,000 compared to other options. Now a company offers to pay half costs for half revenues; the recommendation is to accept, to share risk while still gaining from potential revenues.

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    Quantitative Analysis

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    The document presents a decision tree for a quantitative analysis assignment regarding whether to purchase and explore land or take no action. It analyzes the expected monetary value at each decision node based on probabilities of finding different minerals at varying percentages. The recommended decision is to conduct a 3-day test at node 3, as it has the highest expected monetary value of $2,400,000 compared to other options. Now a company offers to pay half costs for half revenues; the recommendation is to accept, to share risk while still gaining from potential revenues.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    19 views5 pages

    Decision Tree - Kareem Shaker Farid Draz - Assignment

    Uploaded by

    Kareem
    The document presents a decision tree for a quantitative analysis assignment regarding whether to purchase and explore land or take no action. It analyzes the expected monetary value at each decision node based on probabilities of finding different minerals at varying percentages. The recommended decision is to conduct a 3-day test at node 3, as it has the highest expected monetary value of $2,400,000 compared to other options. Now a company offers to pay half costs for half revenues; the recommendation is to accept, to share risk while still gaining from potential revenues.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    Assignment

    Quantitative Analysis

    Decision Tree

    Dr/ Adel Sakr

    Prepared By/ Karim Shaker Farid Draz


    1
    Manganese 1% 30-3-1= 26M

    Purchase & Explore Gold 0.05%

    1
    250-3-1= 246M

    Silver 0.2%
    150-3-1= 146M

    Not Found -3-1= - 4M


    Manganese 3% 30-3-1-1= 25M
    Gold 2% 250-3-1-1= 245M

    Decision 3-Days Test


    Purch. Silver 1%
    Not Found 94%
    150-3-1-1= 145M
    -3-1-1= - 5M
    3
    No Land -1M

    Manganese 0.75%
    Gold 0.04%
    30-3-1-1= 25M
    250-3-1-1= 245M
    2
    Purch.
    Silver 0.175%

    Do Nothing
    0 5 No Land 99.035%
    150-3-1-1= 145M

    -3-1-1= - 5M
    4
    No Land -1M
    2
    1. EMV = (26M*0.01) + (246M*0.0005) + (146M*0.002) + (0.9875 * - 4M)
    = - 3,275,000

    2. EMV = (0.5*2,400,000) + (0.5*-1,000,000) = 700,000


    3. EMV = 25M*0.03 + 245M*0.02 + 145M*0.01 + 0.94 * - 5M =
    2,400,000

    EMV = - 1,000,000

    4. EMV = 25M*0.0075 + 245M*0.0004 + 145M*0.00175 + 0.99035 * - 5M


    = - 4,412,500

    EMV = - 1,000,000

    5. EMV = 0
    3
    What would you recommend (S&E) should do and why?

    1. The best decision is at node 3 to purchase after test (EMV = 2,400,000)

    2. 3-Day test EMV for node 2 = 700,0000

    3. The best decision relatively to the chance of 50% is 3-day test

    4
    A company working in a related field to (S&E) is prepared to pay
    half of all costs associated with this parcel of land in return for half
    of all revenues. Under these circumstances what would you
    recommend (S&E) should do and why?

    • Pay half of all costs associated with this parcel of land in return for half of
    all revenues will affect all calculated pay off to the half, all loses to half, all
    cost to the half but the question here am I willing to lose half the revenue
    if I found any significant metals.

    I recommend to pay the half and share the risk and in case if I do not find
    any significant metals that means loses will drop to half.

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