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Company SuperRich is considering the possibility of capacity expansion. The company has three options. The first is to build a small facility that it could
Company SuperRich is considering the possibility of capacity expansion. The company has three options. The first is to build a small facility that it could build at a cost of $ million. If demand for new products is low, the company expects to receive $ million in revenue with the small facility; if demand is high, it expects $ million in revenues using the small facility. The second option is to build a large factory at a cost of $ million. If demand is low, the company would expect $ million in revenues with the large plant; if demand is high, the revenue is expected to be $ million. In either case, the chance of high demand is and low demand is The third option is not to construct any new facility, which will lead to $ million revenue regardless of the demand condition.
a Construct a decision tree and conduct the analysis to help company SuperRich to make the best decision.
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