WGU C207 QUM3 Task 2: Decision Tree Analysis | Passed on First
Attempt |Latest Update with Complete Solution
P. Lagarde
Western Governors University
Data Driven Decision Making - C207
QUM3 — QUM3 Task 2: Decision Tree Analysis
A1. Business Question Description Answered by Applying Decision Tree Analysis
Business Question:
MPC, a pharmaceutical company, is considering three strategic alternatives: developing
a new drug, modifying an existing drug, or making no changes to their current product line. The
business question is: Which option yields the highest expected value (EV) when accounting for
uncertain market conditions?
Justification for Decision Tree Analysis:
Decision tree analysis is appropriate here because each strategic alternative has
multiple possible outcomes, each with associated probabilities and financial payoffs. This
method quantifies and compares those outcomes systematically, providing a data-driven
recommendation.
B. Relevant Data Value
The table below as well as the attached excel spreadsheet includes the accurate
demands, profit per unit, probabilities, and calculated payoffs for each alternative in the decision
tree analysis. Payoffs are computed as demand profit per unit and rounded to two decimal
places.
Alternative State Probability Demand Profit per unit Payoff ($)
New Drug Favorable 0.76 4,966 0.68 $3,376.88
New Drug Unfavorable 0.24 1,205 0.68 $819.40
Existing Drug Favorable 0.60 5,377 0.98 $5,269.46
Existing Drug Unfavorable 0.40 1,807 0.98 $1,770.86
No Change Favorable 0.88 1,101 0.84 $924.84
No Change Unfavorable 0.12 541 0.84 $454.44
Attempt |Latest Update with Complete Solution
P. Lagarde
Western Governors University
Data Driven Decision Making - C207
QUM3 — QUM3 Task 2: Decision Tree Analysis
A1. Business Question Description Answered by Applying Decision Tree Analysis
Business Question:
MPC, a pharmaceutical company, is considering three strategic alternatives: developing
a new drug, modifying an existing drug, or making no changes to their current product line. The
business question is: Which option yields the highest expected value (EV) when accounting for
uncertain market conditions?
Justification for Decision Tree Analysis:
Decision tree analysis is appropriate here because each strategic alternative has
multiple possible outcomes, each with associated probabilities and financial payoffs. This
method quantifies and compares those outcomes systematically, providing a data-driven
recommendation.
B. Relevant Data Value
The table below as well as the attached excel spreadsheet includes the accurate
demands, profit per unit, probabilities, and calculated payoffs for each alternative in the decision
tree analysis. Payoffs are computed as demand profit per unit and rounded to two decimal
places.
Alternative State Probability Demand Profit per unit Payoff ($)
New Drug Favorable 0.76 4,966 0.68 $3,376.88
New Drug Unfavorable 0.24 1,205 0.68 $819.40
Existing Drug Favorable 0.60 5,377 0.98 $5,269.46
Existing Drug Unfavorable 0.40 1,807 0.98 $1,770.86
No Change Favorable 0.88 1,101 0.84 $924.84
No Change Unfavorable 0.12 541 0.84 $454.44
