Question: PLEASE TYPE AND EXPLAIN YOUR WORK. NO HANDWRITTEN NOTES ON NOTEBOOKS OR SCREENSHOTS A manager is trying to decide whether to build a small, medium

PLEASE TYPE AND EXPLAIN YOUR WORK. NO HANDWRITTEN NOTES ON NOTEBOOKS OR SCREENSHOTS

PLEASE TYPE AND EXPLAIN YOUR WORK. NO HANDWRITTEN

A manager is trying to decide whether to build a small, medium or large facility. Demand can be low, average or high, with the estimated probabilities being 0.25, 0.40 and 0.35, respectively A small facility is expected to earn an after-tax net present value of just $18,000 if demand is low. If demand is average, the small facility is expected to earn $75,000; it can be increased to medium size to earn a net present value of $60,000. If demand is high, the small facility is expected to eam $75,000 and can be expanded to medium $60,000 or large to eam S125.000 A medium-sized facility is expected to lose an estimated $25,000 if demand is low and carn $140,000 if demand is average. If demand is high, the medium-sized facility is expected to earn a net present value of $150,000; it can be expanded to a large size for a net payoff of $145,000. If a large facility is build and demand is high, earnings are expected to be $220.000. If demand is average for the large facility, the present value is expected to be S125,000, if demand is low, the facility is expected to lose $60,000. a) Draw a decision tree for this problem. b) What should management do to achieve the highest expected payoff

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