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An international chemical company is considering increasing its worldwide polyethylene capacity. Polyethylene is a plastic common in the manufacture of packaging materials, automobile components, kitchen
An international chemical company is considering increasing its worldwide polyethylene capacity. Polyethylene is a plastic common in the manufacture of packaging materials, automobile components, kitchen utensils, etc. The following are the possible alternatives that management is reviewing for the project: Build a new grassroots facility Expand an existing plant Establish a joi nt venture with an overseas company After some extensive studies, an initial design, the estimated net present values of the payoff in S millions for three alternatives, at three different scenario levels of the future polyethylene demand, are as shown in the following table. Low Market Stable Market Demand 30 High Market Demand 100 Project DecisionDemand 50 -25 10 Expansion 50 75 30 Joint Venture 45 Estimated net present values of payoff (S millions) Low Market Demand 20 Stable Market Demand 35 High Market Demand 45 Future market Probability (%) Probability estimates for market outcome Develop a decision tree to illustrate the situation and solution, under a condition of rislk as presented in probability estimates table. How would the decision be interpreted
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