You can build either a large electronics section or a small one in your Pullman drugstore. You can also gather additional information or do not gather. If you gather additional information, the results could suggest either a favorable or an unfavorable market, but it would cost you $2,000 to gather the information. You believe that there is a 0.6 probability that the information will be favorable. If the market is favorable, you will earn $20,000 with a large section or $10,000 with a small one. With an unfavorable electronics market, however, you could lose $25,000 with a large section or $15,000 with a small section. Without gathering additional information, you estimate that the probability of a favorable market is 0.5. A favorable report from the study would increase the probability of a favorable market to 0.8. Furthermore, an unfavorable report from the additional information would decrease the probability of a favorable market to 0.3. In this situation, you can find the best decision by creating a decision tree of this problem and analyzing the tree. What would be the best decision for you? What would be the expected value of your best decision? Gather additional information. If the market is favorable, build a large section. If the market is unfavorable, build a small section. Expected value is $1,600. Gather additional information. If the market is favorable, build a small section. If the market is unfavorable, build a large section. Expected value is $1,600. Gather additional information. If the market is favorable, build a small section. If the market is unfavorable, build a large section. Expected value is $7,300. Without gathering additional information build a large section with the expected value of $7,300. The Collector's Choice Inc. (CCI), a luxury car import company, has an old warehouse at the Port of Miami, Florida, where it temporarily stores expensive sports cars and automotive parts that arrive from Europe. This summer, CCI has noticed that the termite infestation in the warehouse has escalated to a point where tenting cannot be postponed anymore. (Tenting is the process of wrapping a building inside a huge tent that is subsequently filled with a poisonous gas capable of killing most forms of life inside, including insects, plants, pets, and human beings.) CCI's pest control company's contract specifies a to-do list of pre-tenting tasks, which include: • Turning off all air-conditioning units and opening all windows of the warehouse • Turning off all internal and external lights, including those operating on a timer • Pruning all outdoor vegetation at least 18" away from the -warehouse • Soaking the soil around the warehouse on the first day of tenting The requirement of opening all windows is particularly worrisome to CCI because it means turning off the alarm system, leaving the warehouse vulnerable to burglary for 48 hours-the required amount of time for the poisonous gas to do its job. Therefore, Alex Ferrari, the warehouse manager, is thinking about hiring a security company to monitor the facility during that period. CCI's property insurance deductible is $25,000, and Alex is assuming that if thieves are willing to enter a building full of poisonous gas to steal something, they would certainly take more than $25,000 worth of parts-or even an entire car! After making a few phone calls, Alex gets in touch with ProGuard, a trustworthy local security company that charges $150 per hour to have a security guard stationed outside their warehouse. The city of Miami police records indicate that about 20% of businesses that left their facilities unattended during tenting reported stolen property in the past 3 years. Although Alex thinks ProGuard's prices are reasonable, and having a guard outside the warehouse would certainly help, he is still not sure whether it is worth spending the extra money. After all, ProGuard's contract does not guarantee the protection it provides is infallible. In fact, an analysis of the company's records indicates that 5% of their clients were burglarized over the past 3 years.