This Decision Tree Analysis Calculator is designed for software engineers and data scientists to perform detailed decision tree analysis with ease and precision. It facilitates decision-making by evaluating possible outcomes in uncertain scenarios.
Calculator
Results
Data Source and Methodology
Authoritative Data Source: Based on the principles of decision analysis as outlined in "Decision Analysis for the Professional" by John C. Goodpasture. All calculations rely strictly on the formulas and data provided by this source. Learn more.
The Formula Explained
Expected Value (EV) is calculated as follows: EV = Σ (Probability × Outcome)
Glossary of Variables
- Probability (%): The likelihood of a particular outcome occurring.
- Outcome Value: The monetary value of the outcome.
- Expected Value: The sum of all possible outcomes, each multiplied by their probability of occurrence.
How It Works: A Step-by-Step Example
For a scenario where there's a 50% probability of gaining $100, and a 50% probability of losing $50, the expected value is calculated as: EV = (0.5 × 100) + (0.5 × -50) = $25.
Frequently Asked Questions (FAQ)
What is a decision tree?
A decision tree is a graphical representation of possible solutions to a decision based on different conditions.
How do you use this calculator?
Input the probability and outcome value for each scenario, and the calculator will compute the expected value.
What is expected value in decision analysis?
Expected value is a calculated average of outcomes, weighted by their probabilities, used to predict the most likely outcome of a decision.
Can this calculator handle multiple scenarios?
Yes, input each scenario's probability and outcome value to compute the overall expected value.
Is the calculator suitable for financial analysis?
Yes, it can be used to evaluate financial decisions by predicting potential outcomes and their impacts.