A group of medical professionals is considering the construction of a private clinic. If the medical demand is high (i.e., there is a favorable market for the clinic), the physicians could realize a net profit of $100,000. If the market is not favorable, they could lose $40,000. Of course, they dont have to proceed at all, in which case there is no cost. In the absence of any market data, the best the physicians can guess is that there is a 5050 chance the clinic will be successful.

Construct a decision tree by fill-in the blanks below in reference to the following chart. The decision choice at Decision 1 is________ and that at Decision 2 is_________ Event 1 is___________ and Event 2 is___________ . The probability for Prob1 is___________ and that for Prob2____________ is . Payoff 1 is_______________ and Payoff 2______________ is . EMV 1 is_______________ and EMV 2____________ is .

Prob 1 Event 1 Payoff 1 EMV 1 Decision 1 0 Prob 2 Event 2 Payoff 2 Max EMV EMV 2 Decision 2 0