To go regional at the end of the 3 years would cost another $10 million. To distribute regionally from the outset would cost $12 million. The risk-free rate is 4 percent. In either case, the product will have a life of 6 years, after which the plant will be worthless. Given the graphical information in Figure 7-8 and the following data, what policy should Kazin adopt?

Expected Cash Flows (in Thousands)

Year Branch 0 1 2 3 4 5 6