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firm that plans to expand its product line must decide whether to build a small or a large facilit produce the new products. If it builds a small facility and demand is low, the net present value ter deducting for building costs will be $400,000. If demand is high, the firm can either maintair e small facility or expand it. Expansion would have a net present value of $450,000, and aintaining the small facility would have a net present value of $50,000 a large facility is built and demand is high, the estimated net present value is $800,000. If emand tums out to be low, the net present value will be -$10,000 The probability that demand will be high is estimated to be .60, and the probability of low demand s estimated to be 40 a Analyze using a tree diagram b Compute the EVPI How could this information be used? c Determine the range over which each altemative would be best in terms of the value of Pidemand low firm that plans to expand its product line must decide whether to build a small or a large facilit produce the new products. If it builds a small facility and demand is low, the net present value ter deducting for building costs will be $400,000. If demand is high, the firm can either maintair e small facility or expand it. Expansion would have a net present value of $450,000, and aintaining the small facility would have a net present value of $50,000 a large facility is built and demand is high, the estimated net present value is $800,000. If emand tums out to be low, the net present value will be -$10,000 The probability that demand will be high is estimated to be .60, and the probability of low demand s estimated to be 40 a Analyze using a tree diagram b Compute the EVPI How could this information be used? c Determine the range over which each altemative would be best in terms of the value of Pidemand low