A Company Must Decide Whether to Build a Small,medium,or Large

Essay

A company must decide whether to build a small,medium,or large grocery store.Marketing research findings indicate a 0.35 probability that demand will be low and a 0.65 probability that demand will be high.If the company builds a small grocery store and demand is low,the net present value will be $150,000.If demand is high the company can buy its additional grocery needs from a wholesaler and realize a net present value of $100,000 or expand and realize a net present value of $120,000.If the company builds a medium grocery store and demand is low,the net present value will be $175,000;if demand turns to be high the company could do nothing and realize a net present value of $100,000,or expand and realize a net present value of $135,000.If the firm builds a large grocery store and demand is low,the net present value will be $50,000;if demand turns out to be high the net present value will be $250,000.
a.Develop a decision tree for this problem.
b.Analyze the decision tree and determine which alternative should be chosen.