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Decision Tree Analysis

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Decision tree analysis for IT project where the data center is updated with new equipment such as 20-30 web and storage servers (IBM), 8-10 switches, 4 enterprise grade routers, and couple firewalls (Cisco), and few rows of server racks. There are three decision choices. One is to go ahead with renewal and purchase of all the equipment, the second option is not to perform any updates to the data center and leave everything as it is, and third option is buying new parts (hard drives, memory, power supplies, router and switch modules) for existing equipment to improve performance. Please come up with reasonable numbers for all the equipment (prices can be easily found on the Internet) and any other calculations concerning this project, to be used in decision tree analysis.

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Here is the problem. I had to add more content to your problem in order to make it more realistic.

Decision tree analysis for IT project where the data center is updated with new equipment. There are three decision choices. One is to go ahead with renewal and purchase of all the equipment, the second option is not to perform any updates to the data center and leave everything as it is, and third ...

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The solution explains the concepts very well using the example in the question. All the steps are clearly explained and outlined. The answer is very easy to understand and can be followed along with anyone who has a basic understanding of the subject. Overall, an excellent response to the question.

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Decision Tree Analysis: Use decision tree analysis to recommend a production schedule and decide whether to publish the book.

Harvey Publishing Company, a small publisher in Columbus, is considering a new book. Typesetting and related costs to prepare for the production are $10,000. It will cost $2 per copy to produce the book. If additional copies are needed at a later time, the set-up cost will be$5,000 and the cost per copy will again be $2. The book will sell for $14 a copy. Royalties, commissions, shipping costs, and so on will be $4 a copy. If the book gets good reviews, it can be expected to sell 5,000 copies a year for 3 years. If it gets bad reviews, sales will be 2000 copies in the first year and will then cease. There is a 0.3 probability of a favorable review. Sally Harvey, president, faces a choice between ordering an immediate production run of 15,000 copies or a production run of 5,000 copies, followed by an additional production runs at the end of the first year if the book is successful. All production runs must be in increments of 5,000 copies. Harvey uses a 10% required return for evaluating new investments. She will pay no taxes because of previous losses and her capital is very limited. Use decision tree analysis to recommend a production schedule and decide whether to publish the book.

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