Harvard Business Essentials, Decision Making

best course of action would be to pursue alternative B. Of the two

options, alternative B offers the highest risk-adjusted net present

value. It is risk-adjusted by incorporation of the probability in the

final financial result.

Decision trees typically are more robust than the two used in fig-

ure 5-2. More comprehensive decision trees evaluate more options

and include multiple decision points. In general, the more alterna-

tives you consider and the more complex the decision, the more

likely you are to discover a solution that meets your needs.

A decision tree, however, does not automatically indicate the

best course of action; you still need to assess ...