Multi question

Construct a basic decision tree based upon this problem and determine which course of action the medical professionals should take ie no market research included; THEN expand this tree by adding the market research ie as the first decision node Future probabilities have been provided here in the book. **No need to answer their specific questions, although my directions will answer some of theirs. NOTE: DON'T FORGET TO DEDUCT THE COST OF THE MARKET RESEARCH FROM YOUR PAYOFFS.

Part-1

A group of medical professionals is considering the construction of a private clinic. If the medical dem and is high (i.e., there is a favorable market for the clinic), the physicians could realize a net profit of$100,000. If the market is not favorable, they could lose $40,000. Of course, they dont have to proceed at all, in which case there is no cost. In the absence of any market data, the physicians best guess is that there is a 5050 chance the clinic will be successful. Construct a decision tree to help analyze this problem. What should the medical professionals do?

Part 2

The physicians in Problem Part -1 have been approached by a market research firm that offers to perform a study of the market at a fee of $5,000. The market researchers claim their experience enables them to use Bayes Theorem to make the following statements of probability: Probability of a favorable market given a favorable study = 0.82 Probability of an unfavorable market given a favorable study = 0.18 Probability of a favorable market given an unfavorable study = 0.11 Probability of an unfavorable market given an unfavorable study = 0.89 Probability of a favorable research study = 0.55 Probability of an unfavorable research study = 0.45