Management of a company is to decide whether to build a small, medium or large plant for a new series of product to be launched. The level of demand is uncertain as the product is new in India. The market research firm, the company engaged, has assessed through research that the demand of the product may be poor, moderate or good, with probability 0.20, 0.55 and 0.25 respectively .

If the large plant is built the possible results are:

a. Poor demand and lose 300,000

b. Moderate demand and make profit of 6,000,000

c. Good demand and make a profit of 10,500,000

If the medium plant is built the firm will lose 1,200,000 if demand is poor but make a return of 6,600,000 if demand is moderate . In the case when demand is good it may continue with the medium plant , stretch itself and make 6,900,000 or enlarge the plant and make a net return of three possibilities are equally likely as of now . Rs 7,200,000.All three possibilities are equally likely as of now

If the small plant is built the company will still earn 1,200,000 if demand is poor . If demand is moderate , it may continue with the small plant and make a return of 2,400,000 or enlarge the plant and make a net return of 3,000,000. Here also both scenarios seem to be equally likely . If demand is good they can continue in as - is condition and make 2,400,000 or enlarge moderately and make net return of 3,000,000or go for large expansion and make a net return of 4,800,000 . All three possibilities are again equally likely . If the cost of building small , medium & large plant is , 3,000,000, 4,500,000 6,000,000 respectively , decide the best possible decision for the company through a decision tree.