WGU QUM3 Task 2: Decision Tree Analysis| Passed on First
Attempt |Latest Update with Complete Solution
QUM3 Task 2: Decision Tree Analysis
November 2nd, 2025
A1. Describe a Business Question
What decision should major pharmaceutical companies (MPC) make to maximize profit, develop
a new drug line, modify the existing drug for new FDA approved applications, or continue with
the current drug line, given the uncertainty of favorable or unfavorable market conditions?
A2. Justify Why Decision Tree Analysis is Appropriate
Decision tree analysis is the most appropriate technique for MPC because the company faces
multiple uncertain outcomes and needs to compare the expected profits of each alternative. The
decision involves choosing between three potential actions: developing a new drug, improving
an existing drug for new applications, or maintaining the current product line, each with different
probabilities of success and payoffs.
The market research data from drug market analysts Inc. (DMA) provides the necessary
probabilities (Likelihood of favorable or unfavorable market conditions) and payoff estimates
(profit per unit x expected demand). Decision tree analysis allows MPC to calculate the expected
value (EV) for each alternative by combining these probabilities and payoffs.
This analytical approach gives management a quantitative basis for selecting the option that
maximizes expected profit and minimizes risk. It also allows visualization of outcomes, supports
, strategic decision making under uncertainty, and ensures clarity when presenting
recommendations to executive leadership.
B. Identify the Relevant Data Values Required for the Decision Tree Analysis
The data used for the decision tree analysis includes the demand levels, profit per unit, and
probabilities for each potential decision alternative provided in the market research report from
drug markets analysts inc. (DMA). These values allow calculations of the total payoffs and
expected values for each possible outcome.
These figures show possible market demand under both favorable and unfavorable conditions,
the corresponding profit per unit, and the probability of each state of nature occurring. Together,
these inputs were used to calculate the payoffs (Demand x Profit) and the expected value (EV)
for each alternative to determine the most profitable course of action.
C. Decision Tree Analysis
The data were analyzed using decision tree analysis to determine which alternative developing a
new drug, modifying the existing drug line, or continuing with the current product would
produce the highest expected monetary value.
Each brand of the decision tree represents a state of nature with its own probability and payoff
calculated from the market research data.
Attempt |Latest Update with Complete Solution
QUM3 Task 2: Decision Tree Analysis
November 2nd, 2025
A1. Describe a Business Question
What decision should major pharmaceutical companies (MPC) make to maximize profit, develop
a new drug line, modify the existing drug for new FDA approved applications, or continue with
the current drug line, given the uncertainty of favorable or unfavorable market conditions?
A2. Justify Why Decision Tree Analysis is Appropriate
Decision tree analysis is the most appropriate technique for MPC because the company faces
multiple uncertain outcomes and needs to compare the expected profits of each alternative. The
decision involves choosing between three potential actions: developing a new drug, improving
an existing drug for new applications, or maintaining the current product line, each with different
probabilities of success and payoffs.
The market research data from drug market analysts Inc. (DMA) provides the necessary
probabilities (Likelihood of favorable or unfavorable market conditions) and payoff estimates
(profit per unit x expected demand). Decision tree analysis allows MPC to calculate the expected
value (EV) for each alternative by combining these probabilities and payoffs.
This analytical approach gives management a quantitative basis for selecting the option that
maximizes expected profit and minimizes risk. It also allows visualization of outcomes, supports
, strategic decision making under uncertainty, and ensures clarity when presenting
recommendations to executive leadership.
B. Identify the Relevant Data Values Required for the Decision Tree Analysis
The data used for the decision tree analysis includes the demand levels, profit per unit, and
probabilities for each potential decision alternative provided in the market research report from
drug markets analysts inc. (DMA). These values allow calculations of the total payoffs and
expected values for each possible outcome.
These figures show possible market demand under both favorable and unfavorable conditions,
the corresponding profit per unit, and the probability of each state of nature occurring. Together,
these inputs were used to calculate the payoffs (Demand x Profit) and the expected value (EV)
for each alternative to determine the most profitable course of action.
C. Decision Tree Analysis
The data were analyzed using decision tree analysis to determine which alternative developing a
new drug, modifying the existing drug line, or continuing with the current product would
produce the highest expected monetary value.
Each brand of the decision tree represents a state of nature with its own probability and payoff
calculated from the market research data.
