A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low, average, or high, with the estimated probabilities being

0.40,

0.35,

and

0.25,

respectively.

A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low, average, or high, with the estimated probabilities being 0.40, 0.35, and 0.25, respectively. A small facility is expected to earn an after-tax net present value of just $11,000 if demand is low. If demand is average, the small facility is expected to earn $15,000; it can be increased to medium size to earn a net present value of $50,000. If demand is high, the small facility is expected to earn $25,000 and can be expanded to medium size to earn $70,000 or to large size to earn $75,000 A medium-sized facility is expected to lose an estimated $25,000 if demand is low and earn $90,000 if demand is average. If demand is high, the medium-sized facility is expected to earn a net present value of $100,000; it can be expanded to a large size for a net payoff of $145,000. If a large facility is built and demand is high, earnings are expected to be $180,000. If demand is average for the large facility, the present value is expected to be $80,000; if demand is low, the facility is expected to lose $40,000 Choose the correct decision tree below. Note that each payoff is given in thousands ($000). O A OB. High 0.405180 Avg 0.35580 Low 0.25540 Q High 0.25 180 Low 0.40 - 540 Expand to g 5145 2 2 High 0.40 Low 0.25 500 Expand to lg $146 Do nothing $100 Expand to lng $75 Expand to me$70 Do nothing $25 Expand to me$50 Do nothing $15 Large Med Avg 0.35 29525 Small High 0.40 Avg 0.35 Low 0.25911 Avg 0.35 80 Large High 0.25 Med Avg 0.35 $25 Small High 0.25 Avg 0.35 Low 0.40511 Low 0.40500 Do nothing 5100 Expand to lng $75 Expand to me$70 Do nothing $25 Expand to me 60 Do nothing $15 OC. OD. High 0 25 High 0.25180 Avg 0.35 580 Low 0.40 - $40 Expand to $145 Do nothing $100 Large Expand to lng $145 Large High 0.25 Avg 0.35 $80 Low 0.40 - $40 High 0.25180 Med Avg 0.35 90 Low 0.40-525 Avg 0.35590 Low 0.40 - 525 Small High 0.25 Do nothing $100 Expand to lg $75 Expand to mesto Do nothing $25 Expand to me$50 Do nothing $15 High 0.25 Expand to lrg 575 Expand to me70 Do nothing $25 Small Avg 0.35 Low 0.40511 Avg 0.35 Expand to medai Low 0.40511 Do nothing $15