When looking at an EXCEL decision tree where can the expecte

When looking at an EXCEL decision tree, where can the expected value and terminal payoff of a choice be found?

Solution

When you are looking at an excel decision tree, the expected value is shown next to the node. It is calculated for each and every node and is written near the node that says at this node. the expected value is this much.Say for instance $40,000.

There are 3 kind of nodes in treeplan: terminal node, event nodes and decision node. The value is found at event node and shown next to them. Now, the values at decision node displayed next to them are maximized value. For example, from 1 path , it comes $80,000 and from another it comes $40,000 then at this particular decision node, the value is taken as $80,000.

Terminal values appear at terminal nodes. Generally, terminal nodes are placed as the name suggests, at the end of the path. So, at the every end of an expected path, the values indicated are the terminal payoff if that path is chosen. That means at the end of ever path, you will find a terminal payoff.

Do comment if there is any query. Thank you. :)