Mary Decker is suing the manufacturer of her car because of a defect that she believes caused her...

Question:

Mary Decker is suing the manufacturer of her car because of a defect that she believes caused her to have an accident, and kept her out of work for a year. She is suing the company for {eq}\$ 3.5 {/eq} million. The company has offered her a settlement of {eq}\$ 700,000 {/eq}, of which Mary would receive {eq}\$ 600,000 {/eq} after attorneys? fees. Her attorney has advised her that she has a {eq}50 \% {/eq} chance of winning her case. If she loses she will incur attorneys? fees and court costs of {eq}\$ 75,000 {/eq}. If she wins she is not guaranteed her full requested settlement. Her attorney believes that there is a {eq}50 \% {/eq} chance she could receive the full settlement, in which case Mary would get {eq}\$ 2 {/eq} million after her attorney takes his cut, and a {eq}50 \% {/eq} chance that the jury will award her a lesser amount of {eq}\$ 1,000,000 {/eq}, of which Mary would get {eq}\$ 500,000 {/eq}. Using decision-tree analysis, decide if Mary should sue the manufacturer.

Decision Tree:

The term decision tree is basically used by the operation management of the organization. The term Decision tree helps in making the decision regarding the buying and manufacturing of the units or components of a particular product. The term decision tree is a diagrammatic presentation of the numerical tabulation.

Answer and Explanation:

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Decision Tree:

Decision Tree

Calculation for full settlement is:

{eq}\begin{align*} & = {\rm{Mary}}\;{\rm{Amount}} \times \dfrac{{50}}{{100}} \times...

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What Is a Decision Tree? - Examples, Advantages & Role in Management

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Chapter 2 / Lesson 12
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Clearly identifying all possible solutions for a given decision is an important part of successful management. In this lesson, you will learn how to use a decision tree to identify and select possible courses of action.


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