Exercise:

As chief engineer for your municipal water supply agency, you need to replace the motors that power your water pumps. A set of used motors are available from another city at a cost of $10,000.  Experience has shown that a used motor is good only 20% of the time. But the city that is offering to sell you their used motors has also offered to test those motors for you, although they admit their motor-testing apparatus is not very reliable. 70% of the time it tests good motors as good and 40% of the time it tests bad motors as good. Your only other alternative is to buy new motors for $45,000. Use a decision tree to compare the expected cost of the used motors to that of the new motors.

Exercise:

As chief engineer for your municipal water supply agency, you need to replace the motors that power your water pumps. A set of used motors are available from another city at a cost of $10,000.  Experience has shown that a used motor is good only 20% of the time. But the city that is offering to sell you their used motors has also offered to test those motors for you, although they admit their motor-testing apparatus is not very reliable. 70% of the time it tests good motors as good and 40% of the time it tests bad motors as good. Your only other alternative is to buy new motors for $45,000. Use a decision tree to compare the expected cost of the used motors to that of the new motors.