The Property Company

A property owner is faced with a choice of:

(a) A large-scale investment (A) to improve her flats. This could produce a substantial pay-off in terms of increased revenue net of costs but will require an investment of 1,400,000. After extensive market research it is considered that there is a 40% chance that a pay-off of 2,500,000 will be obtained, but there is a 60% chance that it will be only 800,000.

(b) A smaller scale project (B) to re-decorate her premises. At 500,000 this is less costly but will produce a lower pay-off. Research data suggests a 30% chance of a gain of 1,000,000 but a 70% chance of it being only 500,000.

(c) Continuing the present operation without change (C). It will cost nothing, but neither will it produce any pay-off. Clients will be unhappy and it will become harder and harder to rent the flats out when they become free.

How will a decision tree help the taking of the decision?