The CEO of McBurger considers opening a new restaurant with two size options: large model ( Large) and small model (Small). She anticipates two possible states of peak-hour demand at the new location: high demand (H) with a probability of 0.75 and low demand (L) with a probability of 0.25. The CEO uses the expected value criterion for decision making and she developed the original decision tree below.

What is the expected value (in $1,000) of the original decision tree?

a. 10

b. 7.5

c. 12

d. 22

e. 8

Payoff (in $1,000) (0.75) 12 Large 6 (0.25) 1 (0.75) 10 Smail 3 (0.25)