1. Small Bakery Decision Tree (with calculations) Steve Smith owns a small bakery, ET A large corporation has offered to either expand his business or buy him out. If the corporation buys him out he will receive a single lump sum, but if he allows the corporation to expand his business, the amount he will receive will depend on the popularity of his bakery products. Expansion Payouts Small expansion - $200,000 Medium expansion - $1,000,000 Large expansion - $2,000,000 Corporation Buyout Flat rate - $500,000 Probabilities P(Small expansion) -0,4 P(Medium expansion) -0.5 P(Large expansion) = 0.1 Create a Decision Tree to solve this problem. 1. Using the Maximax method, which should he choose? 2. Using the Maximin method, which should he choose? 3. Using the Expected Value method, which should he choose? 4. How much should Steve be willing to pay for "perfect information"? (Calculate the FVPI) . . . 2. Cocktail Party Decision Trees (without calculations) You are hosting a cocktail party for 75 people on Saturday. It is overcast in the morning as you are getting ready to set up. You must decide now if you are going to host the party inside or outside. . Your house is not too large, so you prefer to be outside as it may get cramped in the house with 75 people. Your guests would be more comfortable outside. However if you set up the party and it does rain, the refreshments will be ruined, your guests will get damp, and you will wish you had decided to have the party in the house, Keep in mind you do not have probabilities or numbers associated with this decision Create a Decision Tree to solve this problem 1. Will you be hosting the party inside or outside? 2. Include your reasoning