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##### Christina started a business of rehabbing old homes,.,.

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Christina started a business of rehabbing old homes. He recently purchased a circa-1800 Victorian;mansion and converted it into a three-family residence. Recently, one of his tenants complained that the;refrigerator was not working properly. As Christina?s cash flow was not extensive, he was not excited;about purchasing a new refrigerator. He is considering two other options: purchase a used refrigerator or;repair the current unit. He can purchase a new one for \$400, and it will easily last three years. If he repairs;the current one, he estimates a repair cost of \$150, but he also believes that there is only a 30 percent;chance that it will last a full three years. If the repaired refrigerator does not last three years, he will have;to buy a new one (\$400). If he buys a used refrigerator for \$200, he estimates that there is a 60%;probability that it will last at least three years. If it breaks down, he will still have the option of repairing it;for \$150 or buying a new one. If he repairs, there is a 30 percent change that it will last. If it doesn?t he;will have to buy a new one.;a. (5 points) Construct a decision tree for this problem.;b. (5 points) Identify the strategy that minimizes Christina?s expected cost for the next three;years.

Paper#24569 | Written in 18-Jul-2015

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