What is Decision Tree Analysis?
A decision tree maps a choice and its uncertain outcomes as branches, attaches probabilities and payoffs to each, and computes the expected monetary value of every path. You pick the branch with the best EMV — turning a gut-feel argument into arithmetic.
Exam questions typically hand you the tree: multiply along each branch (probability × outcome), subtract each option's cost, compare. Work slowly; the math is easy and the traps are all in careless reading.
Formula
Branch value = Σ(probability × payoff) − option cost
Worked example
Build a feature in-house ($120K cost; 70% works fine, 30% needs $80K rework → EMV −$144K) or buy a license ($150K flat → −$150K). The tree says build, by $6K — close enough that the PM also weighs what the tree can't see: vendor lock-in and team learning.