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

0.25,

0.40,

and

0.35,

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 0.25, 0.40, and 0.35, respectively. A small facility is expected to earn an after-tax net present value of just $14,000 if demand is low. If demand is average, the small facility is expected to earn $15,000; it can be increased to medium size earn a net present value of $70,000. If demand is high, the small facility is expected to earn $25,000 and can be expanded to medium size to earn $90,000 or to large size to earn $100,000 A medium-sized facility is expected to lose an estimated $25,000 if demand 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 $135,000. If a large facility is built and demand is high, earnings are expected to be $150,000. 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 $70,000. Choose the correct decision tree below. Note that each payoff is given in thousands (5000). A OB. Expand to lng $135 Do nothing $100 High 0.35 150 Avg 0.40 80 $70 Large High 0.35 Med Avg 0.405 LOW 0.25 $80 Expand to lrg $135 Low 0 28580 High 0.35 150 Low O 2500 High 0.35 Avg 0.40 s90 Large - $70 Med Avg 60.40590 2-525 High 0.35 Small Avg 0.40 Low 0.25514 Small High 0.35 Do nothing $100 Expand to $100 Expand to meggo Do nothing $25 Expand to mesto Do nothing $16 Expand to lng $100 Expand to me 90 Do nothing $25 Expand to me.70 Do nothing $16 Avg 0.40 Low 0.25914 OC OD. Q High 0.253150 High 0.353150 Avg 0.40580 Low 0.38570 Q Expand to lg $135 Large High 0.25 2 Med Avg 0.40.500 Low 0.30 $25 Expand tong $135 Do nothing - 5100 Expand to le $100 Expand to me go Do nothing $25 Expand to meg 70 Do nothing_$15 Large Low 0 22 $80 -$70 High 0.35 Med Avg 0.40 son $25 Small High 0.35 Low 0.25590 Small High 0.25 Do nothing $100 Expand to lng $100 Expand to medoo Do nothing $25 Expand to meg 70 Do nothing $15 Avg 0.40 Avg 0.40 Low 0.35514 Low 0.25914 What should management do to achieve the highest expected payoff? The management should build a in order to achieve the highest expected payoff of $. (Enter your response as a whole number.) medium facility small facility large facility 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 0.25, 0.40, and 0.35, respectively. A small facility is expected to earn an after-tax net present value of just $14,000 if demand is low. If demand is average, the small facility is expected to earn $15,000; it can be increased to medium size earn a net present value of $70,000. If demand is high, the small facility is expected to earn $25,000 and can be expanded to medium size to earn $90,000 or to large size to earn $100,000 A medium-sized facility is expected to lose an estimated $25,000 if demand 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 $135,000. If a large facility is built and demand is high, earnings are expected to be $150,000. 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 $70,000. Choose the correct decision tree below. Note that each payoff is given in thousands (5000). A OB. Expand to lng $135 Do nothing $100 High 0.35 150 Avg 0.40 80 $70 Large High 0.35 Med Avg 0.405 LOW 0.25 $80 Expand to lrg $135 Low 0 28580 High 0.35 150 Low O 2500 High 0.35 Avg 0.40 s90 Large - $70 Med Avg 60.40590 2-525 High 0.35 Small Avg 0.40 Low 0.25514 Small High 0.35 Do nothing $100 Expand to $100 Expand to meggo Do nothing $25 Expand to mesto Do nothing $16 Expand to lng $100 Expand to me 90 Do nothing $25 Expand to me.70 Do nothing $16 Avg 0.40 Low 0.25914 OC OD. Q High 0.253150 High 0.353150 Avg 0.40580 Low 0.38570 Q Expand to lg $135 Large High 0.25 2 Med Avg 0.40.500 Low 0.30 $25 Expand tong $135 Do nothing - 5100 Expand to le $100 Expand to me go Do nothing $25 Expand to meg 70 Do nothing_$15 Large Low 0 22 $80 -$70 High 0.35 Med Avg 0.40 son $25 Small High 0.35 Low 0.25590 Small High 0.25 Do nothing $100 Expand to lng $100 Expand to medoo Do nothing $25 Expand to meg 70 Do nothing $15 Avg 0.40 Avg 0.40 Low 0.35514 Low 0.25914 What should management do to achieve the highest expected payoff? The management should build a in order to achieve the highest expected payoff of $. (Enter your response as a whole number.) medium facility small facility large facility