^{A certain company decides at the present time to launch a certain product, whose commercial life is estimated with some certainty in ten years. For the manufacture of the product in question, it is necessary to build a factory, considering the problem of its size, which will be conditioned by future demand. The company considers two alternatives at the initial moment:}

^{A) Build a large-capacity factory, with an initial cost of 3,000,000 u.m. (monetary units), in which case it will not be possible to reform it in the face of a sharp decrease in demand. B) Build a small factory, with an initial cost of 1,300,000 u.m. Which is susceptible to extension to two years, (in case the demand had been high during the same) with a cost of 2,200,000 u.m. If the demand was low in that first period, the company will continue to operate with the small plant.}

^{The marketing studies office is completely sure that if in the first two years the demand is low, it will continue to be so during the remaining eight years, since substitute products will appear that will prevent the sale of the aforementioned product. If, on the contrary, the demand is high in the initial period, and the company does not expand the factory (if it opted for the small factory at the initial moment), it is certain that competitors will enter, lowering the expected profitability. There is a 70% chance that demand will be high during the first two years. If it really is high, there is an 86% probability that it will remain high for the next eight years, while the probability that it will fall is 14%. The economic data for the different possibilities are estimated as follows: -For the large plant, and if the demand is high during the ten years, annual profits of 1,000,000 u.m. will be achieved; for reduced demand, the benefit will be CU10,000/year for each of the following ten years; If demand is high in the first period and then declines, annual profits of CU1,000,000 are estimated. and CU100,000, respectively. -In the case of a small plant, benefits of 450,000 u.m./year are considered, during the first two years if the demand is high. In the event that it then goes from high to low, profits over the next eight years would be CU400,000. If, on the contrary, it remains high, these will be CU300,000. In the case of having a reduced demand during the ten years, the benefits will be 400,000 u.m. by year. -In the case of expanding the small factory, revenues of 700,000 and 50,000 u.m. can be considered. /year if the demands are, respectively, high and low, and always referring to the third to tenth years.}