Chance the market will be unfavorable

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A coffee shop must decide whether or not to expand into an empty adjacent storefront. Whether or not they expand, then there is a 60% chance the market will be favorable and a 40% chance the market will be unfavorable. If they expand and the market is favorable, they will make a profit of $1 million. If they expand and the market is unfavorable, then they can either operate with a loss of $0.3 million or undertake a promotional campaign. If they undertake the promotional campaign, then there is a 70% chance they will make $0.2 million and a 30% chance they will lose $0.5 million. If they do not expand and the market is favorable, then they will make a profit of $0.5 million. If they do not expand and the market is unfavorable, then they lose $0.1 million. Draw a decision tree to represent this situation. Do not solve it.

Reference no: EM132293951

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