Decision Trees

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1. What is a diasdvantage of Decision trees?

  • Not supported by numerical outcomes
  • No external influences considered e.g. PESTLE
  • Only shows an optimistic view
  • Hard to understand and compare
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2. What is Probability?

  • Likelihood of an event occuring
  • Net gain + expected value
  • Event likelihood added up to 1.5

3. How do you calculate Expected Value?

  • Total expected Value X Probability
  • Financial Value X Probability
  • Financial Outcome - costs
  • Total expected value - Associated Costs

4. What is a decision tree?

  • A mathematical model used to help managers make decisions
  • Model which shows historical revenues and profit
  • A way of showing cash flow over monthly periods
  • A way of mindmapping revision

5. How do you calculate Net gain?

  • Total Expected Value - Associated costs
  • Financial Value X Probability
  • Financial Outcome - costs
  • Total expected Value X Probability

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