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Mathematics, 11.11.2021 19:40 leonarddyer2868

A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low, average, or high, with the estimated probabilities being 0.25, 0.40, 0.35, respectively. A small facility is expected to earn an after-tax net present value of just $18,000 if demand is low. If demand is average, the small facility is expected to earn $75,000; it could be increased to average size to earn a net present value of $60,000. If demand is high, the small facility is expected to earn $75,000 and can be expanded to average size to earn $60,000 or to large size to earn $125,000. A medium-sized facility is expected to lose an estimated $25,000 if demand is low and earn $140,000 is demand is average. If demand is high, the medium-sized facility is expected to earn a net present value of $150,000; it can be expanded to a large size for a net payoff of $145,000. If a large facility is built and demand is high, earnings are expected to be $220,000. If demand is average for the large facility, the present value if expected to be $125,000; if demand is low, the facility is expected to lose $60,000. a. Draw a decision tree for this problem

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A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low...
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