The per-capita consumption of evaporated milk is about ten times higher in Newfoundland and Labrador (NL)...

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The per-capita consumption of evaporated milk is about ten times higher in Newfoundland and Labrador (NL) than it is in the rest of Canada. For this reason, a company that makes evaporated milk will sometimes test-market in NL before trying a national campaign. A new formulation of evaporated milk is aimed at those who are diabetic, but it would be a healthy choice for anyone. Marketing only in NL would cost about $18,000. If successful (probability 0.4) there would be revenues of $50,000; if unsuccessful the revenues would only be $13,000. Should the NL market be successful, a follow-up Canadian campaign at a cost of $500,000 would have a 70% chance of success with a revenue of $1,300,000, otherwise it would be a failure with a revenue of $200,000. Should the NL market be unsuccessful, a follow-up Canadian campaign would have only a 20% chance of success (with the same cost, and the same revenues for success and failure). A Canadian campaign not preceded by a NL campaign would have a 35% chance of success. It would cost $575,000, and would produce a revenue of $1,200,000 if successful, but only $250,000 otherwise. Draw and solve a decision tree for the situation (using payoff nodes where appropriate), and state the recommendation and ranking payoff clearly. The per-capita consumption of evaporated milk is about ten times higher in Newfoundland and Labrador (NL) than it is in the rest of Canada. For this reason, a company that makes evaporated milk will sometimes test-market in NL before trying a national campaign. A new formulation of evaporated milk is aimed at those who are diabetic, but it would be a healthy choice for anyone. Marketing only in NL would cost about $18,000. If successful (probability 0.4) there would be revenues of $50,000; if unsuccessful the revenues would only be $13,000. Should the NL market be successful, a follow-up Canadian campaign at a cost of $500,000 would have a 70% chance of success with a revenue of $1,300,000, otherwise it would be a failure with a revenue of $200,000. Should the NL market be unsuccessful, a follow-up Canadian campaign would have only a 20% chance of success (with the same cost, and the same revenues for success and failure). A Canadian campaign not preceded by a NL campaign would have a 35% chance of success. It would cost $575,000, and would produce a revenue of $1,200,000 if successful, but only $250,000 otherwise. Draw and solve a decision tree for the situation (using payoff nodes where appropriate), and state the recommendation and ranking payoff clearly.