Question: 16. Wilbo, Inc. needs to construct a new manufacturing facility. They have two choices a large or a small facility. Construction for large facility is

16. Wilbo, Inc. needs to construct a new

16. Wilbo, Inc. needs to construct a new manufacturing facility. They have two choices a large or a small facility. Construction for large facility is $300.000 and for the small one $200.000. If demand for digits is high, the large facility will generate a net expected value for $1.200.000 for the life of the facility. Or if demand is low, the fimm could build a small facility, which could be expected after one year (revenue would be S150,000) at a cost of $100.000. If expanded after one year the facility would then generate $1.500.000 over the remaining life of the facility. If the small facility is no expanded the firm would realize revenue of S850,000 over the remaining years. If demand is low, the large will generate S490,000 while the small will generate $500,000. The probability of high demand is 70%, low 30%. Draw the decision tree and decide what Wilbo should do

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