Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Decision Trees, revision notes as uploaded in F5 revision section
- This topic has 13 replies, 4 voices, and was last updated 9 years ago by John Moffat.
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- May 28, 2015 at 12:59 pm #249819
Hi John
Can you let me know if this is correct for the solution to the decision Trees question?
A
High 20000 x 0.6 = 12000
Low (5000-5000+7500)x 0.4=3000
Less initial costs (10000)
=5000B
High 40000x.6=24000
Low 10000x.4=4000
Less initial costs (15000)
=13000Decision: invest in B
May 28, 2015 at 3:06 pm #249862Yes – that is correct 🙂
May 28, 2015 at 4:48 pm #249916ah that’s great I have no practice on these so I was afraid I would get the method wrong , thanks
May 28, 2015 at 8:15 pm #249989You are very welcome 🙂
May 29, 2015 at 12:23 am #250048For A, Low, are there not 2 options, to invest or not to invest (with scrap value of $1000) or do we simply use the higher of these 2 options at the decision point?
May 29, 2015 at 10:43 am #250136There are two options, but because it is our choice we choose the better of the two (i.e. to invest rather than scrap)
May 29, 2015 at 12:29 pm #250198Would it have been possible to neither invest or scrap, that would have given low a total revenue of 10000 over the 10 years (before adjusting for expected values) ? Or if that was an option would they have cleary stated it?
May 29, 2015 at 12:49 pm #250208No – the question does make it clear what revenue will be if we decide not to scrap, and the only choice is to either scrap or continue – the decision has to be made.
May 29, 2015 at 2:10 pm #250234Sorted, thanks
Good luck in the exam chloe
May 29, 2015 at 3:42 pm #250269You are welcome 🙂
May 29, 2015 at 8:57 pm #250353Thanks John 🙂
Good luck to you too drice99, not long to go now!
May 30, 2015 at 9:03 am #250448You are welcome 🙂
May 31, 2015 at 4:34 pm #251043hey.cud u tell me how u got 5000-5000+7500 in A
May 31, 2015 at 6:00 pm #251084We have received 5000 for the first 5 years, we pay then pay out 5000 in order to receive 7500 ( 5 years at 1500 per year).
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