A manager is trying to decide whether to build a small, medium, or large facility. The 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 $18000 if demand is low. If demand is average, the small facility is expected to earn $75000; it can be increased to medium size to earn a net present value of $60000. If demand is high, the small facility is expected to earn $75000 and can be expanded to medium size to earn $60000 or to large size to earn $125000. A medium size facility is expected to lose an estimated $25000 if demand is low and earn $140000 if demand is average. If demand is high, the medium- sized facility is expected to earn a net present value of $150000. It can be expanded to a large size for a net payoff of $145000. If a large facility is built and demand is high, earnings are expected to be $220000. If demand is average for the large facility, the present value is expected to be $125000; if demand is low, the facility is expected to lose $60000.

a. Draw a decision tree for this problem?

b. What should management do to achieve the highest expected payoff?