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Hi sir..just wanna ask….um can a decision point (the square) arises after an outcome( the circle) as the usual way is that in a decision tree it only has ONE decision point which is the square at the far left( the beginning) and a lot of outcome….
Yes it can – there can be several decision points. In fact it is more likely that there will be several and not just one decision point.
(Maybe the first decision is which machine to buy, but then after a year or two we need to make a second decision as to whether or not to sell a machine and the decision can be affected by how well or badly the machine has been doing in the first one or two years.)
The example in the course notes is an example of this.
Pls help!!! i don’t understand decision trees. I hope it doesn’t come out in December 2013 exams.
Decision trees are a bit less likely in December because they were asked in the June 2013 exam.
However, they could be asked. I cannot really add anything to what I say in the lecture, but if you say where you have the problem then I will try my best to help!
Thank you very much Mr. John Moffat. You are one of the best teachers I’ve listened to. I just don’t understand when to start calculating the expected values. I pray it doesn’t show up this December.
don’t bother man. Decision trees won’t come up in Dec 2013. I’m sure. Take my word. Just ignore it.
As I wrote before, it is unlikely that there will be decision trees in the December exam, but nothing is ever certain
Sir John, You are really brilliant. And Opentuition is a miracle for me and to my success by Allah Almight.
hello sir. as decision tree and life cycle was there in June13 attempt. will it come again in dec13?
I am not the examiner and so I do not know!!
It is maybe less likely in December, but it is too dangerous to guess questions – you must be happy with the whole syllabus if you want to be successful in F5.
The problems with expected values mentioned at the end of part A of Risk and Uncertainty include: Actual profit will not be equal to expected value. I understood that it will be equal to one of the profit figures in real life and not the average(expected value)
We have used expected values for our decision tree calculations. How reliable is our decision tree in real life? Wouldn’t the profit from refurbishing be either one or the other and not an average(expected value)?
Decision trees themselves are simply a way of setting out the various things that can happen. They can be very useful in real life.
The decision making itself is the same as for any expected value problem and has the same limitations.
i am worried about this…too long
And same question was in paper
great lecture i did benefit a lot …thank you ..but i am wondering why u did not include the aspect of the VALUE OF PERFECT INFORMATION which was recently added to the syllabus?
If you look at example 1 in the course notes, you will see that perfect information is covered. The changes to the syllabus were announced over six months ago and our course notes were updated immediately.
Perfect information does not require the use of a decision tree (although obviously you could draw a decision tree just as you could draw one for any decision under uncertainty. In practice you would only draw a tree if it helped you – there is no need in example 1; in the exam you only draw a tree if you are asked to.
After going through the lecture at least twice, I finally understand every aspect of example 2 that you explain and will attempt the 2012 past paper question. It was a reall………………y good lecture!! I must say though, that like ‘Miss A’ I was wondering how come you included the ‘shut down’ option if Combi did the market research and the result was poor, when the question indicated that they would only be prepared to consider the cheap refurbishment. I felt that you included it because the only reason they would also consider shutting down would be due to cost factor, since if the result is poor it doesn’t make sense to invest in an expensive refurbishing. plus with or without the research the shut down will yield 5m, which is less than the 4.6m return from the cheap refurbishing with the research. Let me know if my logic is heading in the right direction.
Yes – your logic is correct. Although you would only consider the cheap refurbishing, you could decide to shut down if refurbishing were to lose money.
Sexy example 2
Kinda lost, lengthy question and a bit confusing I agree.
its not that confusing. ALL the information is given in the question and we just have to assort it out carefully, But i will agree that it is LENGHTY.
OOOOH MY GOD! I THINK ALL OF MY 3HRS WILL GET EXHAUSTED HERE.. TOO LONG..TIME CONSUMING HEISH..! THE TREE HAS GOT TOO MANY BRANCHES A!
It is very unlikely that the exam would ask for a complicated tree. More importantly she is likely to just test your understanding with a fairly simply problem (and a fairly simple tree).
Do realise that the whole point of the exam is to test that you understand what you are doing – not to try and make you do terribly complicated things!
Thank you, on side note Messi > Cristiano lol
dont know how to thank….simply great……
this is easy but shall be time consuming.
True, although it is likely that anything in the exam will be relatively easy (but will therefore only be a part of a question).
Yep, I’m sort of lost too. He did a good job though, but my brain just gave up after a while lol.
very good lecture…..can any body tell me,is this q came in past exams….?
No – because it was not in the syllabus before. But it is now
Look @ Jun 2013 q1
hahahahahahaha the lecture is awesome and I laughed so hard when you said: “I am sure your are completely lost by now.”
I am!! lol
Beautiful lecture …..it seems rather a lengthy question…how often has it been examined and what is the best approach to it in terms of time mgt??
Aaargghhhh……it is no doubt a great lecture but I fount it to complicated:((
good lecture thank you sir.
Woah Thank You For this lecture! This helped me a lot!
i am afraid you have not calculated the cost of the market research of 200000
@arjunudayp91, even if u do it doesnt change the answer :
7.6316m-200000=7.4316….stands better to the later option ……..is tht rite…..???
good lecture sir thank you
Dear Sir, I can’t understand that why do we have an option of shutting down the office when market research has poor results ??The question indicates that if we do market research & the result is poor, then we will only be prepared to consider the cheaper refurbishment?
shouldn’t only be cheaper refurbishment option be there if the market research has poor result , as per the question’s statement? ( And NO shutting down or expensive refurbishment should be included)
I am not getting continueos lecture for 2 days now,video goes off whiles watching and has to be played over and over again.
Please check this for me.
i’m afraid, that problem is at your end..
That was simple and precise lecture on Decision Tree!! thank you!! I benefited a lot!!
I have a question
31:36 – 31:57
Do Mkt Research/Good Result/Expensive refurbishment.
The lecture calculate
Net expected value = Expected value – refurbishment cost
= 12.87m – 4m = 8.87m
Why didnt include the cost for market research:
Net expected value = Expected value – market research cost – refurbishment = 12.87m – 4m – 0.2m = 8.67m
I do notice its just a small difference and it would not affect the final answer but it got me puzzled abit.
Ahhh its ok I got it.
@numero270, Great )
Excellent lecture on decision tree. Thank you.
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