A company uses decision tree analysis to evaluate potential options. The management accountant for the company has established the following:

What would be the cost of the upgrade that would make the company financially indifferent between building new premises and upgrading the old one?(a) ?100 000(b) ?900 000(c) ?1 000 000(d) ?1 700 000

Cash flows from sales revenue 0.8 High sales = 2 000 000 Build new premises Cost 1 000 o00 Low sales = 1 000 000 0.2 0.7 High sales = 2 000 000 Upgrade old premises Cost = ? Low sales = 1 000 000 0.3