The owner of a small artisan ice cream parlor, which has traditional and vegan ice cream options,
Question:
The owner of a small artisan ice cream parlor, which has traditional and vegan ice cream options, must analyze what she will do with her business within the next five years. Three options have been evaluated, the first is to expand its small store located in Providencia, the second is to change location towards the center of Santiago, and the third is to open a new branch in Las Condes.
If you decide to expand your current store, this would not take long and should cost $ 870,000, in the case that you choose to move to the center of Santiago, this transfer will cost $ 2,100,000, which includes adapting a new local and the transfer of clothing. Finally, if you decide to open a new branch, you will have to incur a cost of $ 3,000,000, since you must buy new machinery and furniture to decorate the new store. All costs would be incurred for the first year only.
For all options there is a 15% probability that the market will remain the same, a 60% probability that the market will grow rapidly and a 25% that the market will grow very slowly.
The earnings that you would obtain annually in each case is shown in the following table:
The market is holding The market is growing fast The market is growing moderately
A-Expand STORE $ 190,000 $ 450,000 $ 300,000
B-Moving downtown $ 144,000 $ 600,000 $ 350,000
C-New branch $ 100,000 $ 240,000 $ 240,000
Evaluate for 5 years by the decision tree method and select the best alternative:
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe