Need all steps Answer the following questions based on decis

Need all steps

Answer the following questions based on decision tree shown below

1 Which branche(s) should be crossed out?(2 Points)

2 What is the expected value for each cycle node?(2 Points)

3 What is your final decisions?(1 Point)

Solution

1. Branches to be crossed out are Do nothing ($40) and Do nothing ($10)

2.expected value of Build Small ->High Demand ->expand ($55) the value is $55 as during high demand we need to make an extra effort to meet the high demand hence the highest value that can be achieved in this flow is $55.

expected value of Build Large -> Low Demand -> Cut prices ($50) this value is $55 during low demand we need to look for alternatives to reduce the extra expense hence we need to look at maximum price cut in this flow is $50.

3. My decision is to Build Small and when there is increase or high Demand, we need to look at expansion to meet the demand else we might loose business