Solve Problem $2$:

Problem $2)$ Ruka Construction Company is considering bidding on a new office building complex

contract. First, the company manager must decide whether to bid on the contract or not. The

cost of preparing the bid is $$20,000.$ The company has a $\%75$ chance of winning the contract if it

submits a bid. If the company wins the bid, it will have to pay $$1,500,000$ to become a partner

in the project. The company will then conduct a market research study to forecast demand

before beginning construction. The cost of this study is $$100,000.$ The possible outcomes of the

market research study show there is $45\%$ for high interest and $35\%$ for moderate, and $20\%$ for

low interest for the office building.

The company's manager, regardless of the result of the market study or even without a market

study, should decide whether to build the complex or sell the rights in the project to another

developer.

If the company decides to build the complex, the cost of building will be $$10,000,000.$ The

company manager estimates the following prices based on the market study result.

If Demand is high, the price of the finished building will be $$15,000,000.$

If Demand is moderate, the price of the finished building will be $$14,000,000.$

If Demand is low, the price of the finished building will be $$13,000,000.$

Also, the company manager can sell its rights to another developer at any time for $$3,000,000.$

The following probabilities are given based on the market study:

P $($Demand is High $|$ Forecast is High$)=0\mathrm{.}60$

P $($Demand is Moderate $|$ Forecast is High$)=0\mathrm{.}30$

P$($ Demand is Low $$ Forecast is High $)=0\mathrm{.}10$

P $($Demand is Moderate $|$ Forecast is Moderate$)\backslash (=0\mathrm{.}35\backslash )$

P $($Demand is Low $|$ Forecast is Moderate$)\backslash (=0\mathrm{.}15\backslash )$

$\backslash ($ P $\backslash )($Demand is High $|$ Forecast is Low$)\backslash (=0\mathrm{.}30\backslash )$

P $($Demand is Moderate $|$ Forecast is Low$)\backslash (=0\mathrm{.}25\backslash )$

$\backslash ($ P $\backslash )($Demand is Low $\backslash (\backslash$mid $\backslash )$ Forecast is Low$)\backslash (=0\mathrm{.}45\backslash )$

$\backslash ($ P $\backslash )($Demand is High Without Market Study$)\backslash (=0\mathrm{.}50\backslash )$

P $($Demand is Moderate Without Market Study$)\backslash (=0\mathrm{.}30\backslash )$

$\backslash ($ P $\backslash )($Demand is Low Without Market Study$)\backslash (=0\mathrm{.}20\backslash )$

a$.$ Solve by the decision tree, highlight your final branches, and upload the screenshot from your decision tree. The picture should fit on one page.

b$.$ Develop a risk profile for Ruka Construction.

Hint:

$1)$ Decide whether to bid on the contract or not

$2)$ If the company wins, decide whether to do a market study or not

$3)$ Market study results are either forecast is high, Forecast is moderate, or Forecast is low.

$4)$ In any situation, even if you do not do a market study, you should decide whether to build the complex or sell company rights

$5)$ If you build the complex, the market can be in high, moderate, or low demand,