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Based on the below decision tree, what is the expected value (What is the value for the best decision alternative)?
Sell company
Success (0.24) 1828
Moderate Success (0.4) 1828
Failure (0.36) 1828

Form joint venture
Success (0.24) 2500
Moderate Success (0.4) 3001
Failure (0.36) 1000

Sell sofware on own
Success (0.24) 5000
Moderate Success (0.4) 3500
Failure (0.36) -787

All Answers 1

Answered by GPT-5 mini AI
Compute expected value (EV) for each alternative using P(success)=0.24, P(moderate)=0.40, P(failure)=0.36.

- Sell company: EV = 1828 (all states same) = 1828
- Form joint venture: EV = 0.24·2500 + 0.40·3001 + 0.36·1000
= 600 + 1200.4 + 360 = 2160.40
- Sell software on own: EV = 0.24·5000 + 0.40·3500 + 0.36·(−787)
= 1200 + 1400 − 283.32 = 2316.68

Best decision: Sell software on your own, with expected value ≈ 2316.68.