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Letz Products has two decisions to make, with the second decision dependent on the outcome of the first. The company intends to build a new plant. Letz has the option of conducting its own marketing research survey for which the results will either be positive or negative. The information from this survey could help it decide whether to build a large plant, to build a small plant, or not to build at all. Letz recognizes that although such a survey will not provide it with perfect information, it may be extremely helpful.    Using the image explain to your client (Letz) what the above decision tree shows. You are required to show all working.

Letz Products has two decisions to make, with the second decision dependent on the outcome of the first. The company intends to build a new plant. Letz has the option of conducting its own marketing research survey for which the results will either be positive or negative. The information from this survey could help it decide whether to build a large plant, to build a small plant, or not to build at all. Letz recognizes that although such a survey will not provide it with perfect information, it may be extremely helpful.    Using the image explain to your client (Letz) what the above decision tree shows. You are required to show all working.

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Letz Products has two decisions to make, with the second decision dependent on the outcome
of the first. The company intends to build a new plant. Letz has the option of conducting its
own marketing research survey for which the results will either be positive or negative. The
information from this survey could help it decide whether to build a large plant, to build a small
plant, or not to build at all. Letz recognizes that although such a survey will not provide it with
perfect information, it may be extremely helpful. 

 

Using the image explain to your client (Letz) what the above decision tree shows. You are
required to show all working. 

1st decision point $49,200 Survey 2nd decision point Sur. Res. Pos. (45) Sur. Res Neg. (55) No survey $106,400 $2,400 $40,000 Large plant Small $63,600 plant 3 No plant $106,000 Large plant No plant Small $2,400 plant 5 Large plant Small plant No plant -$87,400 $10,000 6 $40,000 Fav. Mkt (0.78) Unfav. Mkt (0.22) Fav. Mkt (0.78) Unfav. Mkt (0.22) Fav. Mkt (0.27) Unfav. Mkt (0.73) Fav. Mkt (0.27) Unfav. Mkt (0.73) Fav. Mkt (0.5) Unfav. Mkt (0.5) Fav. Mkt (0.5) Unfav. Mkt (0.5) $190,000 -$190,000 $90,000 $30,000 $10.000 $190,000 -$190,000 $90,000 $30,000 $10,000 $200,000 -$180,000 $100,000 $20,000 $0
Transcribed Image Text:1st decision point $49,200 Survey 2nd decision point Sur. Res. Pos. (45) Sur. Res Neg. (55) No survey $106,400 $2,400 $40,000 Large plant Small $63,600 plant 3 No plant $106,000 Large plant No plant Small $2,400 plant 5 Large plant Small plant No plant -$87,400 $10,000 6 $40,000 Fav. Mkt (0.78) Unfav. Mkt (0.22) Fav. Mkt (0.78) Unfav. Mkt (0.22) Fav. Mkt (0.27) Unfav. Mkt (0.73) Fav. Mkt (0.27) Unfav. Mkt (0.73) Fav. Mkt (0.5) Unfav. Mkt (0.5) Fav. Mkt (0.5) Unfav. Mkt (0.5) $190,000 -$190,000 $90,000 $30,000 $10.000 $190,000 -$190,000 $90,000 $30,000 $10,000 $200,000 -$180,000 $100,000 $20,000 $0
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