Tesla’s decision to produce a new line of compact and full sized cars resulted in the need to construct either a small plant or a large plant. The best selection of plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has decided to view the possible long-run demand as low, medium, or high. The following payoff table shows the projected profit in millions of dollars: Long Run DemandPlant sizeLowMediumHighSmall80200350Large120180190 Construct an influence diagram. Construct a decision tree. Recommend a decision based on the use of the optimistic, conservative, and minimax regret approaches.

Decision Tree A decision tree is a decision support tool. It uses a tree-like model of decisions

Answered: Construct an influence diagram.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Tesla’s decision to produce a new line of compact and full sized cars resulted in the need to construct either a small plant or a large plant. The best selection of plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has decided to view the possible long-run demand as low, medium, or high. The following payoff table shows the projected profit in millions of dollars:

Long Run Demand
Plant size	Low	Medium	High
Small	80	200	350
Large	120	180	190

Construct an influence diagram.
Construct a decision tree.
Recommend a decision based on the use of the optimistic, conservative, and minimax regret approaches.

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