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Use the following decision tree, but update the probabilities as follows: Probability of Small Demand = 11% Probability of Medium Demand = 31% Probability
Use the following decision tree, but update the probabilities as follows: Probability of Small Demand = 11% Probability of Medium Demand = 31% Probability of Large Demand = remaining probability What is the expected monetary value of the best decision (in millions)? $1.0* Small demand (.4) Do nothing $1.3 Medium demand (.5) Expand $1.3 Large demand (.1) Do nothing $1.5 Expand $1.6 Subcontract Build $1.8 Do nothing $0.7 Other use #1 Expand Medium demand (.5) Large demand (.1) Small demand (.4) $1.5 Other use #2 $1.0 $1.6 Do nothing $1.6 Subcontract $1.5 Build Build $1.7 Do nothing ($0.9) Medium demand (.5) Large demand (.1) Small demand (.4) Other use #1 $1.4 Other use #2 $1.0 Do nothing $1.0 Other use #1 $1.1 Other use #2 $0.9 * Net present value in millions $2.4
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