Recyclops Corporation has grown to become of the largest recycling operations in the northeast, serving parts of Pennsylvania, New York, and New Jersey. Dwight Schrute, president and CEO, is considering expanding recycling operations into Rhode Island. Dwight believes that a small facility in Rhode Island would yield a $650,000 profit regardless of the market for the facility. The success of a medium-sized recycling facility would depend on the market. With a low demand for recycling, Dwight expects a $260,000 return. Dwight estimates that a medium demand would yield a $910,000 and high demand would yield $1,040,000. Although a large facility is riskier, the potential return is greater. With a high demand for recycling in the region, the large facility should return $1,300,000. With a medium demand, the large facility should return only $400,000. Dwight expects to lose $260,000 on the deal if he builds the large facility and demand is low. Economic projections for the region led Dwight to estimate the probability of a low demand at 0.15, medium demand at 0.35, and high demand at 0.5.

To get a better feel for the demand for recycling operations in the region, Dwight has considered hiring the Michael Scott Consulting Company to conduct a survey of potential customers. The cost of the survey is $50,000. MSCC has provided the following information about past survey results:

	Survey Results
Possible Outcome	Low Survey	Medium Survey	High Survey
Low Demand	0.7	0.2	0.1
Medium Demand	0.4	0.5	0.1
High Demand	0.1	0.3	.6

The survey could result in three possible outcomes, with a low survey indicating low demand and high survey indicating high demand.

As the assistant to the president, you have been tasked with developing a decision strategy for this scenario.

• Build and solve a decision tree
• Identify the optimal strategy
• Comment on model sensitivity, especially to changes in Dwights initial estimates of market demand
• Calculate and discuss EVPI and EVSI