Build a decision tree to help you decide if you want to purchase a new car or a used car. The biggest concern or risk with purchasing a used car is the
potential need for repairs and not knowing about any previous problems the car might have had. There is a 40% chance that a used car will need to be
repaired within a one-year period; however, there is a 90% chance that the new car will not need any repairs during the same period. The cost for a used car is
$7,500, and the cost for a new car is $15,000.
Use the information in the table below to decide whether you should buy a used car versus a new car. Pick the decision with the lower investment required.
Create a decision tree to show outcomes for each decision node using the SilverDecisions website Links to an external site.
http://silverdecisions.pl/SilverDecisions.html?lang=en
Note: While the SilverDecisions tool is intuitive, you can find a manual here Links to an external site. http://silverdecisions.pl/
Calculate the expected value of each outcome and show your calculations (Probability x Impact).
Export your decision tree as a .png file and save it on your computer.
Explain the best option based on the outcome and why.
Cost to buy a new car $15,000
