Question: Ahmad is not sure what he should do: he can build a quadplex (i.e.. a building four apartments) or build a duplex. If he gathers

Ahmad is not sure what he should do: he can build

Ahmad is not sure what he should do: he can build a quadplex (i.e.. a building four apartments) or build a duplex. If he gathers additional information, the results could be either favorable or unfavorable, but it would cost him RM1,000 to gather the information. Ahmad believes that there is a 50-50 chance that the information will be favorable. If the rental market is favorable, Ahmad will earn RM 15,000 with the quadplex or RM 5,000 with the duplex. Ahmad doesn't have the financial resources to do both. With an unfavorable rental market, however, Ahmad could lose RM 20,000 with the quadplex or RM 10.000 with the duplex without gathering additional information. Ahmad estimates that the probability of a favorable rental market is 0.7. A favorable report from the study world increase the probability of a favorable rental market to 0.9. Furthermore, unfavorable report from the additional information would decrease probability of a favorable rental market to 0.4. If Ahmad use the decision tree analysis in making the decision, what is he decision

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