Mary’s Factory
Mary is a manager of a gadget factory. Her factory has been quite successful the past three years. She is wondering whether or not it is a good idea to expand her factory this year. The cost to expand her factory is $1.5M. If she does nothing and the economy stays good and people continue to buy lots of gadgets she expects $3M in revenue; while only $1M if the economy is bad.
If she expands the factory, she expects to receive $6M if economy is good and $2M if economy is bad.
She also assumes that there is a 40% chance of a good economy and a 60% chance of a bad economy.
(a) Draw a Decision Tree showing these choices.