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Decision tree analysis For Risk And Uncertainty In Capital Budgeting

Decision tree analysis For Risk And Uncertainty In Capital Budgeting:

In the modern business world, putting the investments are become more complex and taking decisions in the risky situations. So, the decision tree analysis helpful for taking risky and complex decisions, because it consider all the possible event’s and each possible events are assigned with the probability.

[Post Image Courtesy of Suphakit73 at FreeDigitalPhotos.net]

Construction of Decision Tree:

1. Defined the problem

2. Evaluate the different alternatives

3. Indicating the decision points

4. Assign the probabilities of the monetary values

5. Analysis the alternatives.

Accept/Reject criteria Decision tree analysis For Risk And Uncertainty In Capital Budgeting:

If the net present values are in positive the project may be accepted otherwise it is rejected.

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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