2. The Tarheel Manufacturing Company must decide whether to build a large plant or a small one to process a new product with an expected life of 10 years. Demand may be high during the first 2 years, but if many users find the product unsatisfactory, demand will be low for the remaining 8 years. High demand during the first 2 years may indicate high demand for the next 8 years. If demand is high during the first 2 years and company does not expand within the first 2 years, competitive products will be introduced, thus lowering the benefits. If the company builds a large processing plant, it must keep it for 10 years. If its builds the small plant, the plant can be expanded in 2 years if demand is high, or the company can stay in the small plant while making smaller benefits on the small volume of sales. Estimates of demand are these: Probability High demand (first 2 years) 0.5 followed by high demand (next 8 years) High demand (first 2 years 0.1 followed by low demand (next 8 years) Low demand (first 2 years) followed by high demand (next 8 years) Low demand (first 2 years) 0.4 Low demand during first 2 years 0.4 followed by continuing low demand (next 8 years) Probability High demand during first 2 years 0.6 0 Financial costs and profits are as follows: A large plant with high demand would yield Php 1 million annually in profits. A large plant with low demand would yield Php 200,000 annually because of production inefficiencies. A small plant, not expanded, with a low demand would yield annual profits of Php 250,000 for 10 years. A small plant during a 2-year period of high demand would yield Php 450,000 annually: if high demand continued and if the plant was not expanded, this would drop to Php 300,000 annually for the next 8 years as a result of competition. A small plant which was expanded after 2 years would yield Php 100,000 annually for 8 years if low demand occurred during that period. A large plant would cost Php 5 million to build and put into operation. A small plant would cost Php 1.500,000 to build and put into operation. Expanding a small plant after 2 years would cost Php 2,500,000. Under the conditions stated and with the information furnished, analyze the alternatives and choose the best decision.