The Accompanying Figure Shows the Decision Tree of an Operations

Multiple Choice

The accompanying figure shows the decision tree of an operations manager who is considering a new production technique. ER represents his expected return (in thousand $) from the new technique. If he does not adopt the technique his expected return would be zero. The probabilities of the technique being a success or a failure are .7 and .3 respectively. Compute the expected return (in thousand $) from the adoption of the new production technique.

A) $8,400
B) $1,000
C) -$2,000
D) $7,200
E) $8,000