A company is planning a plant expansion. They can build a large or small plant. The payoffs for the plant depend on the level of consumer demand for the company's products. For the large plant, the company expects $85 million in profit if demand is high and $35 million if demand is low. For the small plant, the company expects $54 million in profit if demand is high and $19 million if demand is low.

The company believes that there is a 72% chance that demand for their products will be high and a 28% chance that it will be low.

Construct a payoff and regret matrix based on the given information.

Payoff

Regret

What is the decision according to the EMV criterion? Be sure to support your answer with specific results from Excel.

Is your decision sensitive to the demand assumptions given for this problem? You may answer generally, such as very sensitive or not very sensitive as long as you support your answer.

The company can pay a market research firm to survey consumer attitudes towards the company's products. The market research firm has provided the following cross tabulation showing recent results.

	High Demand	Low Demand	Total
Favorable	.66	.10	.76
Unfavorable	.06	.18	.24
Total	.72	.28	1

make a decision tree. Be sure your tree is complete with all labels, probabilities and EMVs needed.

How much do you think the sample information would be worth financially?

Should the market research firm be hired at a cost of $100,000? Please answer yes or no and briefly explain. Be sure to support your answer with specific results from your Excel model(s).