International Guidance

Memorandum

To: Mr. Thomas Stearns, Project Manager, International Guidance and Controls

From:

Date: October 2, 2012

RE: Software Project for CARV Command and Guidance System

¬¬¬¬

_____________________________________________________________________

I have recently received and reviewed your memorandum regarding your issue with the Confined Aquatic Recovery Vehicle project. I have considered three options and their ability to save your company as much money as possible while completing this project in a timely manner. The three alternatives I considered were to immediately invest in hardware, to stay on your current path with the software developments only or to wait and reevaluate your situation in five months. Each of these scenarios has their benefits and risks and I would like to explain each of these in more detail. The intangible costs of your company's reputation have also been considered and evaluated given that this is a concern of yours and a damaged reputation can dramatically effect your success.

Analysis and Results:

I have used a descriptive decision tree to analyze your situation. Using a decision tree to evaluate and depict your issue allowed me to weigh the different possible outcomes with their associated consequences and probabilities. There are three separate attachments I will be referring to throughout the discussion of my results. I used the probabilities given in your memorandum with the various costs associated with each option and calculated the expected monetary value (EMV) for each alternative. The expected monetary value is the estimated probabilistic value for each option. An EMV allows you to gage the expected costs and/or profits you will be facing regarding each option. Given that we are trying to reduce your costs as much as possible, the lowest EMV is the most desirable option.

Option number one, to immediately invest in hardware developments, resulted in an EMV of $3.5 million (please refer to Attachment 1 for calculations). Option number two (Attachment 1), to stay on track with your current software developments and not invest time or money in hardware developments, resulted in an EMV of $3.32 million. Lastly, option number three (Attachment 2), to wait five months and continue with software developments and then reevaluate the progress of the situation, resulted in the lowest EMV of $3.29 million. For the third alternative, I have made sure to consider your estimates of the favorable and unfavorable progress possibilities that could affect the situation in five months. For each of the calculated EMV's, I assumed that two months was the maximum amount of

...