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{"ops":[{"insert":"Oklahoma Oil company is considering to make a bid for shale oil development contract to be awarded by Government. The company has decided to bid for $2.2 billion. The company has estimated that it has a 60% of winning the contract with this bid. If the firm wins the contract, it can choose one of three methods for getting the oil from the shale: It can develop a new method for oil extraction; Use an existing (inefficient) process, or subcontract the processing out to a number of smaller companies once the shale has been extracted. The results from these alternatives are given below:\n\n                                                              Outcomes                      Probability                    Profit ($'billion)\n\n1 . Develop New Method\n                                                           Great success                    0.30                                   12.00\n                                                           Moderate success              0.60                                     6.00\n                                                           Failure                                0.10                                    -2.00\n\n\n2 . Use Existing Process   \n                                                           Great success                    0.50                                     6.00\n                                                          Moderate success               0.30                                     4.00\n                                                          Failure                                 0.20                                     -0.80\n\n\n3 . Subcontract                             \n                                                           Moderate success             1.00                                     5.00\n\nThe cost of preparing the contract proposal is $0.04 billion. If the company does not make a bid, it will invest into an alternative venture with a guaranteed profit of $0.6 billion.\n\nRequired:\n\n(a) Construct a sequential decision tree for this decision situation. (7 marks)\n(b) Determine whether the company should make a bid. (7 marks)\n(c) Write a report to management at Oklahoma Oil company explaining\n\n(i) Value of perfect information  (2 marks)\n(ii) Any three decision criteria suitable in an uncertain environment (9 marks)\n\n(Total: 25 marks)  \n\n\n   \n"}]}

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