A Company Is Planning a Plant Expansion $\quad$ $\quad$

question 69

Essay

A company is planning a plant expansion. They can build a large or small plant. The payoffs for the plant depend on the level of consumer demand for the company's products. The company believes that there is a 72% chance that demand for their products will be high and a 28% chance that it will be low. The company can pay a market research firm to survey consumer attitudes towards the company's products. There is a 76% chance that the customers will like the products and a 24% chance that they won't. The payoff matrix and costs of the two plants are listed below. The company believes that if the survey is favorable there is an 87% chance that demand will be high for the products. If the survey is unfavorable there is only a 25% chance that the demand will be high. Draw the decision tree for the problem when the survey is performed before the plant size decision is made.
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\underline{\text { Demand }}$
$\begin{array}{lccc}\text { Factory Size } & \text { High } & \text { Low } & \text { Plant Cost (\$million) } \\\hline \text { Large } & 90 & 40 & 5 \\\text { Small } & 55 & 20 & 1\end{array}$

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Definitions:

Parietal Peritoneum

The part of the peritoneum that lines the abdominal and pelvic walls.

Visceral Peritoneum

The layer of the peritoneum that covers the external surfaces of most abdominal organs, providing a protective coating.

Periodontal Ligament

Connective tissue that surrounds the tooth root and attaches it to its bony socket.

Pulp Cavity

The central part of a tooth containing nerves and blood vessels, vital for the tooth's nutrition and sensitivity.