1. Draw a decision tree (1.5 points)
2. Solve the tree (2 points)
3. What should Spectrum do? (0.5 point)

May chances for demand: . . 10. Spectrum Hair Salon is considering expanding its business, as it is experiencing a large growth. The question is whether it should expand with a bigger facility than needed, hoping that demand will catch up, or with a small facility, knowing that it will need to reconsider expanding in three years. The management at Spectrum has estimated the following Small expansion with an occurrence of high demand would business expands at this point, the profitability is expected to require considering whether to expand further. If the be $90,000. If it does not expand further, the profitability is od bats 303 S16 IWE The likelihood of demand being high is 0.70. olaboh the The likelihood of demand being low is 0.30.ns bilde yeol Estimated profits for each alternative are as follows: Large expansion has an estimated profitability of either $100,000 or $70,000, depending on whether demand turns out to be high or low.' Small expansion has a profitability of $50,000, assuming that On voisi . . demand is low. expected to be $60,000