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He is confident in some long-term market research he has already conducted that determined there are 3 possible scenarios for the level of demand. He
He is confident in some long-term market research he has already conducted that determined there are 3 possible scenarios for the level of demand. He estimates that there is a 20% chance that demand will be low, a 40% chance that demand will be medium, and a 40% chance that demand will be high. The small facility would cost $2 million to build. If demand is low, he expects to receive an additional $1.5 million in discounted revenues (present value of future revenues) with the new facility. If demand is medium, he expects an additional $2.5 million. If demand is high, he expects an additional $3 million with the small facility. The large facility would cost $3 million to build. If demand is low, he expects to receive an additional $1.5 million in discounted revenues (present value of future revenues) with the new facility. If demand is medium, he expects an additional $2.5 million. If demand is high, he expects an additional $5 million with the large facility. Construct a decision tree to help Mr. Zuliani make a decision and include your final recommendation in the report
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