Using a Decision Tree

A decision tree is a method used to determine which of two or more decisions is the best one. For example, it can be used to determine buy-versus-build scenarios, lease-or-purchase equations, or whether to use in-house resources rather than outsourcing proj-

Risk

Probability

Impact

EMV

Data loss

.40

-$12,000

-$4,800

New regulation

.80

-$34,000

-$27,200

Vendor discount

.30

+$10,000

+$3,000

Hardware issue

Contingency reserve =

-$29,250 $58,250

Table 11-1 Creating the Contingency Reserve

Table 11-1 Creating the Contingency Reserve ect work. The decision tree model examines the cost and benefits of each decision's outcome and weighs the probability of success for each of the decisions.

The purpose of the decision tree is to make a decision, calculate the value of that decision, or determine which decision costs the least. Follow Figure 11-7 through the various steps of the decision tree process.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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