Question 4 (10 marks) Read the scenario below and answer the questions that follow. An online retailer requires additional warehouse capacity and needs to decide between purchasing a new warehouse, or leasing warehouse capacity. If it proceeds to purchase a warehouse, it needs to be large enough to keep sufficient inventory if the economy is growing at a high rate. In contrast, it is possible to expand capacity with a three-month lag. However, this may lead to short-term stock shortages if economic activity picks up much quicker than originally anticipated. The decision tree, with all the outcomes is given below: Purchase warehouse Rent warehouse Normal Normal Economic activity Probability 0.60 0.60 24 40 8 22 38 Income (R mil) Expenses (R mil) 20 20 20 4 16 30 Calculate the expected profit for the two options to expand warehouse capacity. (8) Recommend the solution that management should pursue. Provide reasons for your answer. (2) 4.1 4.2 Low 0.10 8 High 0.30 Low 0.10 High 0.30