Bakery Products is considering the introduction of a new line of pastries. In order to produce the new line, the bakery is considering either a major or a minor renovation of its current plant. Bill Wicker, head of operations, has developed the following conditional values table:

Under the assumption that the probability of a favorable market is equal to the probability of an unfavorable market, determine:
a) The appropriate decision tree showing payoffs and probabilities.
b) The best alternative using expected monetary value (EMV).

Transcribed Image Text:

ALTERNATIVES Major renovation Minor renovation Do nothing FAVORABLE MARKET $100,000 $ 40,000 $ UNFAVORABLE MARKET -$90,000 -$20,000 $ 0