Consider an investment decision problem with two decision points. At the first decision point, the investor can select between Options A, B, or C, each of which has an uncertain outcome with the probabilities and present worths shown in the table below. If Option B is selected, there is a 60 percent chance that, before the termination of the investment, a futures contract will be triggered that will require the selection of Buyout Option 1 or Buyout Option 2. The probabilities and present worths associated with these buyout options are also shown in the table.

a. Draw a decision tree to represent this situation.

b. Determine what decisions should be made.

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Option Outcome Probability Outcome PW A 0.1 $10 A 0.6 $15 A 0.3 $1 C 0.2 -$5 C 0.5 $10 C 0.3 $20 B 0.4 B 0.6 B with Buyout Option 1 0.5 B with Buyout Option 1 0.5 $12 (no futures decision) Futures decision required $7 $10 B with Buyout Option 2 1.0 $8