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Expando, Inc., is considering the possibility of building an additional factory that would produce a new addition to its product line. The company is currently

Expando, Inc., is considering the possibility of building an additional factory that would produce a new addition to its product line. The company is currently considering two options. The first is a small facility that it could build at a cost of \(\$ 6\) million. If demand for new products is low, the company expects to receive \(\$ 10\) million in discounted revenues (present value of future revenues) with the small facility. On the other hand, if demand is high, it expects \(\$ 12\) million in discounted revenues using the small facility. The second option is to build a large factory at a cost of \(\$ 9\) million. Were demand to be low, the company would expect \(\$ 10\) million in discounted revenues with the large plant. If demand is high, the company estimates that the discounted revenues would be \(\$ 14\) million. In either case. the probabilitv of demand beina hiah is 40. and the orobabilitv of it beina low is 60. Not constructina a new factorv would result in no additional revenue beina aenerated because the current

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