Chris Suit is administrator for Lowell Hospital. She is trying to determine whether to build a large wing on the existing hospital, a small wing, or no wing at all. If the population of Lowell continues to grow, a large wing could return$188,000 to the hospital each year. If a small wing were built, it would return $98,000 to the hospital each year if the population continues to grow. If the population of Lowell remains the same, the hospital would encounter a loss of $121,000 with a large wing and a loss of $62,000

with a small wing. Unfortunately, Suit does not have any information about the future population of Lowell.

Part 2

a) Choose the correct decision tree below. Note that all payoffs are in thousands of dollars.

A.

Build largeGrowStableGrowStableGrowStableBuild smallDo not build$188$121$98$6200

A decision tree depicts decision nodes as squares and state-of-nature nodes as circles. Three branches start at the leftmost square. The first branch is labeled "Build large" and leads to a circle. The circle on the "Build large" branch starts two branches. One branch is labeled Grow and ends with 188 dollars. The other branch is labeled Stable and ends with 121 dollars. The second branch is labeled "Build small" and leads to a circle. The circle on the "Build small" branch starts two branches. One branch is labeled Grow and ends with 98 dollars. The other branch is labeled Stable and ends with 62 dollars. The third branch is labeled "Do not build" and leads to a circle. The circle on the "Do not build" branch starts two branches. One branch is labeled Grow and ends with 0 dollars. The other branch is labeled Stable and also ends with 0 dollars.

B.

Build largeGrowGrowGrowBuild smallDo not build$188$980

A decision tree depicts decision nodes as squares and state-of-nature nodes as circles. Three branches start at the leftmost square. The first branch is labeled "Build large" and leads to a circle. The circle on the "Build large" branch starts a branch. That branch is labeled Grow and ends with 188 dollars. The second branch is labeled "Build small" and leads to a circle. The circle on the "Build small" branch starts a branch. That branch is labeled Grow and ends with 98 dollars. The third branch is labeled "Do not build" and leads to a circle. The circle on the "Do not build" branch starts a branch. That branch is labeled Grow and ends with 0 dollars.

C.

Build largeGrowStableGrowStableBuild small$188-$121$98-$62

A decision tree depicts decision nodes as squares and state-of-nature nodes as circles. Two branches start at the leftmost square. The first branch is labeled "Build large" and leads to a circle. The circle on the "Build large" branch starts two branches. One branch is labeled Grow and ends with 188 dollars. The other branch is labeled Stable and ends with negative 121 dollars. The second branch is labeled "Build small" and leads to a circle. The circle on the "Build small" branch starts two branches too. One branch is labeled Grow and ends with 98 dollars. The other branch is labeled Stable and ends with negative 62 dollars.

D.

Build largeGrowStableGrowStableGrowStableBuild smallDo not build$188-$121$98-$6200

A decision tree depicts decision nodes as squares and state-of-nature nodes as circles. Three branches start at the leftmost square. The first branch is labeled "Build large" and leads to a circle. The circle on the "Build large" branch starts two branches. One branch is labeled Grow and ends with 188 dollars. The other branch is labeled Stable and ends with negative 121 dollars. The second branch is labeled "Build small" and leads to a circle. The circle on the "Build small" branch starts two branches. One branch is labeled Grow and ends with 98 dollars. The other branch is labeled Stable and ends with negative 62 dollars. The third branch going from the first square is labeled "Do not build" and leads to a circle. The circle on the "Do not build" branch starts two branches. One branch is labeled Grow and ends with 0 dollars. The other branch is labeled Stable and also ends with 0 dollars.

Part 3

b) Construct a decision table (enter your responses as whole numbers and include a minus sign if necessary).

	Population trend
	Growth	Stable
Build large wing	$_____ thousand	$___ thousand
Build small wing	$_____ thousand	$_____ thousand
Do not build	$0 thousand	$0 thousand

Part 4

c) Assuming that each state of nature has the same likelihood, determine the best alternative.

The best alternative is ________

a.to build the large wing

b. to build the small wing

c.to not build ,with an EMV=$______thousand (round your response to one decimal place).

Part 5

d) If the likelihood of growth is 0.8 and that of remaining the same is 0.2 and the decision criterion is expected monetary value, which decision should Suit make?

The best alternative is _______

a.to build the large wing

b.to build the small wing

c.to not build

with an

EMV=$______thousand (round your response to one decimal place).