Desicion tree need it for today

Situation

David Chang is the owner of a small electronics company. In six months, a proposal is due for an electronic timing system for the 2016 Olympic Games. For several years, Chang’s company has been developing a new microprocessor referred to as the X-32. The X-32 is a breakthrough component that would allow Chang to develop a timing system that would be superior to any product currently on the market. However, progress in R&D has been slow, and Chang is unsure about whether his staff can complete the X-32 microprocessor in time.

If they continue the R&D and succeed in developing the X-32, there is an excellent chance that Chang’s company will win the $1 million Olympic contract. If they continue the R&D but do not successfully complete the X-32, there is a small chance they will still be able to win the same contract with an alternative, inferior timing system that is a modification of one already developed. If they do not continue R&D, there is no chance to win the contract.

If he continues the project, Chang must invest $200K in R&D expenses. In addition, making a proposal requires developing a prototype timing system at an additional cost of $50K. Finally, if Chang wins the contract, the finished product will cost an additional $150K to produce.

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© 2013, Charles E. Noon, Ph.D.