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ABC Co is a small mail order company, which sells direct to established customer on its mailling list (using catalogue and leaflets). And to

ABC Co is a small mail order company, which sells direct to established customer on its mailling list (using catalogue and le 

ABC Co is a small mail order company, which sells direct to established customer on its mailling list (using catalogue and leaflets). And to a new customers via newspaper adversting. The range of its prooducts covers men's and women's leisurewear, games, toys. Over the last few years the company has built up a mailing lists of several thousand, to whom leissurewear catalogue and leaflets are sent from time to time. An opportunity has risen to buy from a market research company either one or two customer lists, each on costing $20,000. The directors estimate that, if the two list were bought, sales could be average or low, again with equal chances If neither list were bought, it is estimated that sales could be average or low, with the odds 4:1 in favour low sales. Whenever sales turn out to be low, the directors have a contingency plan, in which they could decide whether or not to place advertisement in newspaper, at a cost $9,000, offering "special purchase" The chances of high, average or low sales of "special purchase" are estimated to be 50%, 25%, and 25% respectively. The contributions from the various sales levels ($'000) are shown below Sales levels Normal business Special purchase High 200 40 Average 160 16 Low 110 -20 Requirements: Draw a decision tree for the "mailing list" problem, including all probabilities and pay offs (2 marks)

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