9 Given the following information construct a decision tree and assess the best course of action.

A firm is operating at full capacity and demand for its products is falling. A further decline is expected and this can be met by either adopting one of two new methods of working (A and B). The net cashflow in the case of a decline in demand will be £150,000 if new method A is used or

£140,000 if method B is adopted. However, there is a body of opinion in the firm that sales will not fall and that they will in actual fact rise, even though the fall is more likely. There is general agreement that there is a 55 per cent probability of a fall in sales and a 45 per cent probability of a rise in sales. If sales rise then method A would yield a net cash flow of

£148,000 and method B £142,000.