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An NZ - based tennis ball producer currently faces demand for 2 , 5 0 0 , 0 0 0 balls / year and is

An NZ-based tennis ball producer currently faces demand for 2,500,000 balls/year and is currently capable of producing this many in one year. Each ball sells for $1.3 and costs $0.8 to produce. The producer anticipates that demand may change next year due to tennis world cup being held in New Zealand. Specifically, it is possible that tennis courts/schools may turn to European balls next year, which will reduce the demand for this producer. It is also possible that the demand may increase for this producer as the ministry of sports may encourage courts/schools to buy made-in-NZ balls. It is also possible that the demand may remain unchanged. The marketing team anticipates that the demand may decrease by 20% with probability of 30%, it may increase by 50% with probability of 60%, and it may remain the same with probability of 10%.
The producer is considering upgrading its production line for next year so it can keep up with the possible increase in demand. The upgrade requires a fixed cost of $124,000 and will increase the production capacity to 400,000 balls/year. The unit production cost will most likely (with 80% probability) remain the same, but the contractor who will implement the upgrade anticipates that with 20% probability the upgraded production line may be more efficient and reduce the unit production cost to $0.5/ball.
Construct (i.e., draw) the decision tree of this problem for the producer and with detailed analysis suggest whether the producer should pursue upgrading its production line or not. Consider only this and next year in the decision making. Assume 0.1 discount factor for a year.

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