A regional fast-food restaurant is considering an expansion program.The major factor influencing the success of such a program is the future level of interest rates.It is estimated that there is a 20 percent chance that interest rates will increase by 2 percentage points, a 50 percent chance that they will remain the same, and a 30 percent chance that they will decrease by 2 percentage points.The alternatives they are considering and possible payoffs are shown in the following table:
a.Using decision tree analysis, what is the expected value for building 50 new restaurants?
b.Using decision tree analysis, what is the expected value for building 25 new restaurants?
c.What is the action and corresponding EV for this overall decision tree problem?
Definitions:
Rectus Abdominis
A long muscle of the anterior abdominal wall that helps flex the spine and maintain posture.
Transverses Abdominis
A muscle layer of the anterior and lateral abdominal walls which is deep to (beneath) the internal oblique muscle.
Internal Oblique
A muscle within the abdominal wall that acts in trunk rotation and lateral flexion, also aiding in respiration.
Transversus Thoracis
A muscle within the chest that plays a role in the movement of the thoracic cage.
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