An enterprise evaluates different investment alternatives in the process of developing new products. The first of these is newby purchasing a land and establishing a factory that is compatible with the technology of the new product. Business, m2With a size of 5000 m2 for 3000 dollarit will be able to do this by buying a new plot and enduring the cost of building a factory of 5 million dollar. New factoryWhen it is installed, the demand for the new product to be produced here is high, medium orexpected to be low. The probability of high demand for the new product is 0.50 and the probability of being medium level is 0.30.it is estimated. 2.000.000 units per year when demand is high, 1.500.000 when demand is medium and low1,000,000 units are expected to be sold. The sales price of the new product will be 200 dollar / piece. the BusinessThe second alternative is to increase the production capacity on the small plot next to the existing factory, where it produces its existing products.is to establish a new factory and there will be an investment cost of 4 million dollar for the establishment of this factory. In this caseThe production capacity of existing products is planned to be 1,600,000 units. The current price of the current product is 210 dollar / pc.It will be. Another alternative for the company is to increase the production capacity of existing products, as in the second alternative.
instead of establishing a factory, some changes in workplace layout and production technology with an investment of 1 million dollarIt is done. In this case, it is predicted that the production capacity will increase to 1,750,000 units. Selling the current product.
The price of this alternative is 180 dollar / piece.Before making an investment decision, the enterprise can obtain information from an investment specialist by paying 1.500.000 dollar. Expert,  The company will be able to present three different views on the investment of the new land and the establishment of a new factory; investment is successful,there is an investment of medium profitability or the investment fails. New product development by establishing a new factory with similar featuresWhen the historical data regarding their investments are analyzed, the demand is high; expert's opinion that the new investment will be successfulthe probability of reporting is 60%, and the probability of reporting an opinion that there will be an investment in medium profitability is 25%.When the demand is at a medium level; 30% probability of the specialist to offer the view that the new investment will be successful, the view that it will failthe probability of serving is 5%. When the demand is low; expert's opinion that the new investment will be a medium profitability investmentthe probability of reporting is 40%, and the probability of expressing an opinion that there will be unsuccessful investment is 55%. Business must give
Determine the decision with the Decision Tree. Calculate the expected value of the additional information.

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ANSWER Decision tree analysis is the process of drawing a decision tree which is a graphic represent... View the full answer