Reference no: EM132587477

Global Electronics has set up a new plant in Shanghai supplying iKnowledge, a new lifestyle product focused on enhancing the adult learning experience. One of the key components of this product can either be manufactured from an existing plant in Shenzhen, purchased from suppliers from Chongqing or purchase from suppliers from Vietnam. For the in-source option, there is a need to expand the existing facilities. Economies of scale can be achieved with the in-source option. The projected profit is thus dependent on the demand for the product. The following payoff table shows the projected profit in thousands of dollars.

If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will maximize the expected profit for Global Electronics? Use Decision tree analysis concept to find the best option.