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Question 2 TCICC plans to increase their student intake on the Provo campus for 2021. Therefore, the managing team must decide whether to rent a

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Question 2 TCICC plans to increase their student intake on the Provo campus for 2021. Therefore, the managing team must decide whether to rent a large building or construct a medium campus. If they rent a large building and the student intake is low, the net present value after deducting for building costs will be $55,000. If the student intake is high, the college can use either the old small campus building or renting an additional building. Renting an additional building would have a net present value of $30,000, and using the old small building would have a net present value of $80,000. If a medium campus was constructed and the student intake is high, then the estimated net present value is $150,000. If the student intake turns out to be low the net present value will be (35,000). The probability that the student intake will be high is estimated to be 0.6 and low is estimated to be 0.4. (1) Draw the decision tree to represent the above information. (7 marks) (ii) Calculate the expected values of each course of action and decide, on financial grounds, which course TCICC managing team should take. (5 marks) (Total 12 marks)

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