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21. The owner of Pearl Automotive Dealers is trying to decide whether to expand his current facility. If he expands and customer demand turns weak,
21. The owner of Pearl Automotive Dealers is trying to decide whether to expand his current facility. If he expands and customer demand turns weak, there is a chance he could lease part of his newly constructed facility to another dealer. If he doesn't expand and strong demand occurs, he could attempt to lease another facility across town. Analyze the decision tree in Figure A8 Q. What is the best set of decisions and the expected payoff? - $2,000,000 -$1,200,000 $400,000 Strong Product Demand (50%) Average Product Demand (20%) Property is Leased (20%) Expand Weak Product Demand (30%) Kupe Lease New Facility Property Is Not $100,000 Leased (80%) -26 Do Not Lease New Facility $200,000 $1,800,000 Property is Leased (20%) Facility Do Not Expand Strong Product Demand (50%) 3 Leased (80%)" $1,200,000 Lease New Facility Property is Not Do Not Lease New Facility = $1,300,000 - $900,000 Average Product Demand (20% Week Product Demand 30%) $400,000 Fine AA
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