Make Decision Tree
Fearing a new rise in fuel costs, the City of Wilmington must
decide which of three types of vehicles to purchase for its motor
pool: electric powered, gasoline powered, or dual capacity hybrids.
Using ranges of future gasoline prices, an analyst has already
calculated gains and losses relative to a base.
If the price of a gallon of gasoline
is low in constant dollars, the electric vehicles will lose $2
million over their lifetime; the hybrid vehicles will lose $1
million; and the gasoline vehicles will gain $2 million.
If the price of gasoline is moderate
(an estimated 30% likelihood by outside energy consultants), the
hybrid vehicles will gain $800,000; the gasoline vehicles will lose
$800,000; and the electric vehicles will break even.
If the price of gasoline becomes high
(estimated probability of 40%), gasoline vehicles will lose $2.2
million and electric vehicles will gain $1.8 million. Hybrid
vehicles will return $200,000 if there are no federal government
subsidies. However, at this price range, there is a 50% chance of
federal government subsidies for such hybrid vehicles, leading to a
gain of $1.6 million.
Which type of vehicles should be
purchased? Include a complete decision tree.