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I need help understanding how the payoffs are calculated below. You are the administrator for a small, locally - owned emergent care facility. You are

I need help understanding how the payoffs are calculated below.

You are the administrator for a small, locally - owned emergent care facility. You are exploring the options for increasing services, with a likely need for expanding your clinic imaging capabilities. After hiring a consulting firm, you have been given some expected annual payoffs (in dollars) of each of the decision alternatives. Unfortunately, since the last analysis you have learned that a competitor may be expanding their services as well.

Populate the decision tree below. Of note, the expected payoffs for high/moderate/low demand are 50% of what they would be if a competitor decided not to open. Identify the expected payoff for each alternative.

image text in transcribed
Expected payoffs High Demand $ Transition Probabilities Competitor Opens Demand - High 42% 15% Demand - Moderate 45% Yes > Moderate Demand Demand - Low 40% Demand CT - High 15% Demand CT - Moderate 459% Demand CT - Low 409% Low Demand Demand (do nothing) 33.33% Competitor High Demand $1,000,000 Opens No Moderate Demand $750,000 Low Demand $500,000 MRI High Demand Yes Moderate Demand Imaging Equipment Low Demand Competitor . High Demand $1,200,000 Opens Do Nothing No Moderate Demand $900,000 Low Demand $600,000 YOS High Demand $200,000 Competitor Opens Moderate Demand 50 No Low Demand $400,000 All Demands $0

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