Question 1-20 Marks The PDC is a government agency tasked with supporting the development of the Oman economy. One of PDC's key strategies is to support the diversification of the economy away from a reliance on oil. One of the initiatives under considerations is the construction of a new business complex. The complex will be located near the international airport and will consist of a number of purpose built business units. PDC is also expected to maximize the financial return on the project. However, PDC is facing some uncertainty particularly in relation to the expected demand for units in the complex. PDC president gave two possible chance event outcomes: a strong demand and a weak demand. S1 = strong demand for the units 52 = weak demand for the units As a result of this uncertainty, PDC has commissioned three alternative plans for the complex D1 = to build a small complex of 30 business units D2= to build a medium sized complex of 60 units D3=to build a large complex of 90 units. State of nature Decision Alternative Strong Demand Weak Demand S1 52 Small complex, D1 8 Medium Complex, D2 14 Large Complex,D3 20 Table show, payoff table for the PDC project (in million Rials) Draw a decision tree. PDC is optimistic about the potential for the complex, Suppose that this optimism leads to an initial subjective probability assessment of 0.8 that demand will be strong($1) and corresponding probability of 0.2 that demands will be weak (S2), Calculate the expected value for each of the three decision alternatives and draw a decision dree. What is the recommended decision using the decision tree with expected value? and why? Now, PDC to make the best possible decision, they want to see additional information about the states of nature. So PDC is considering market research study designed to learn more about potential market acceptance of the PDC project. Management anticipated that the market research study will provide one of the following two results: 1. Favourable report: A significant number of the individuals contacted express interest in purchasing or leasing a PDC unit. 2. Unfavourable report: Very few of the individuals' contacted express interest in purchasing or leasing a PDC unit. - 2