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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › decision trees – poor and good result
Why do you add the expected result of the good result and the expected result of the poor result for expensive refurbishment and cheaper refurbishment?
Surely, a poor result and a good result cannot happen at the same time, they are two separate events so why is it that they are added together, rather than using the adding the lines individually?
e.g so expensive refurbishment (4m) — prob of good result 2/3 x good result 13.5m, therefore overall 5m
and expensive refurbishment (4m) —– prob of poor result 1/3 x poor result 6.5m, therefore overall (1.83m)
I don’t add the two together.
It will be one or the other but to make the decision we calculated the expected value (i.e. average).