Company is considering building new racquet center

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Racquet Centers, Inc. (RCI) is a small investment company. The company is considering building a new racquet center. If the demand for the center is high (i.e., there is a favorable market for the racquet center), RCI could realize a net profit of $100,000. If the market is not favorable, RCI could lose $40,000. Of course, they don’t have to proceed at all; in which case, there is no cost. In the absence of any market data, the best RCI can guess is that there is a 50–50 chance the center will be successful. Construct a decision tree to help analyze this problem. What should RCI do? Please show your decision tree, Excel computations, and fully explain your answer.

Reference no: EM132247393

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