Suppose a University is considering creating a new major, Medical Science, in 2021. If the university sticks with its current curriculum and creates no further majors, then the annual revenue from tuition will be ($11.5 million), donation ($4.4 million), and research grants ($2.5 million). At the same time, the university incurs costs such as employee salaries ($6 million), rent ($5 million), and utilities ($2.2 million) to maintain its business annually. If the university decides to create new majors, there are three possibilities.

First, if medical research proves to be successful and new faculty members in medical science receive funding more actively from the state and federal government, then annual research grants are expected to increase from $2.5 to $8 million. Also, medical research alumni are likely to donate funds to the university in the future, which also is expected to increase the amount of donation from $4.4 to $6 million, so the total revenue would increase by $7.1 million. On the other hand, the university should hire more staff/faculties in those areas, which would increase employee salaries from $6 to $8 million, while rent and utilities stay the same as under offering no new major option. However, business analysts expect this probability to be 35%.

Second, there is also a 40% chance that faculties in medical science have a hard time receiving federal research funds due to the recession, in which case, the research grants decrease from $2.5 to $0.7 million, while revenues from tuition and donation stay the same as under offering no new major option. In this scenario, the university will still have to pay employment salary ($8 million) and rent and utilities stay the same as under offering no new major option.

Finally, uncertain economic or regional factors may lead to a huge drop in enrollment, decreasing tuition revenue. The boom in the housing market and recent drought increases rent and utilities dramatically. In other words, there is a 25% chance that the university is suffering a loss of $3.5 million (net profits), if it chooses to offer a new major.

Question: Make a recommendation regarding whether the university should offer a new major or stick to its current curriculum, using a decision tree (Hint: You MUST calculate the expected net profit of the option offering a new major and compare it to the net profit of the option of offering no new major)