1. ABC Toys Inc. is trying to determine whether to make significant alterations to their best selling product line. ABC has hired a marketing research company to perform focus group analysis in order to get a better idea of the demand for the changes The marketing analysis is expected to show a 65% positive outlook and 35% negative outlook. Once they have the analysis, ABC may either adapt the existing product line or make no changes. Final payoffs will depend on market demand either high or low. If the market analysis is positive and ABC goes with an adapted product line, high demand is expected with a probability of 0.70 and a payoff of $4M. Low demand (probability of 0.30) would result in a payoff of $2M. However, If no changes are made, high demand is expected with a probability of 0.30 and a payoff of $4.4M. Low demand would result in a payoff of $3.5M. If the market analysis is negative and ABC goes with an adapted product line, high demand is expected with a probability of 0.40 and a payoff of $4M, low demand would give a payoff of $3.5M. If no changes are made, high demand is expected to have a probability of 0.80 with a payoff of $4.4M and low demand would have a payoff of $2.8.

Draw a decision tree to illustrate this problem Solve the decision tree and make a recommendation to ABC

*a decision tree is a time line from left to right

*examples of my teachers decision trees are attached. I'm honestly confused and don't even know where to start.

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