Question: A company is has found two sites that it is considering obtaining a lease for exploring for natural gas: site 1 and site 2.Site 1 is the larger of the two sites, so the cost of obtaining a lease and for exploring it is $2500000. The probability is 0.38 that there will be a minor natural gas deposit that can be developed for a return of $5500000, and a probability of 0.13 that there will be a major natural gas deposit that can be developed for a return of $8000000,The cost of obtaining a lease and for exploring site 2 is $1500000. The probability is 0.2 that there will be a minor natural gas deposit that can be developed for a return of $2600000, and a 0.05 that there will be a major natural gas deposit that can be developed for a return of $4300000Jf there is a natural gas deposit the cost for the lease and exploration will need to be deducted from the return to determine the profit. If there is no natural gas then the cost for the lease and exploration will need to be paid anyway. The company is risk averse. They have quantified this preference using the following utility curve:

Utility = 100 * (1 - exp(-(profit)/10000000))

which gives positive utility for a profit and negative utility for a loss. The company is only able explore one of the sites and will explore neither site if both expected utility values are negative. Create the decision tree for this problem using the app below and add all probabilities and utility values. In the case of decisions please use probability = 1 for options that are chosen and probability = 0 for options that are rejected. All probability values should be answered to three decimal places. All utility values should be answered to one decimal place. Don't forget the negative signs!

Price: $2.99

Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document