Jody of Jody’s Custom Tailoring is considering expandingher growing business. Th e question is whether to expand with abigger facility than she needs or with a small facility, knowing thatshe will have to reconsider expanding in three years.Jody has estimated the following chances for demand:• Th e likelihood of demand being high is 0.50.• Th e likelihood of demand being low is 0.50. She has also estimated profi ts for each alternative:• Large expansion has an estimated profi tability of either$200,000 or $100,000, depending on whether demand turnsout to be high or low.• Small expansion has a profi tability of $80,000, assuming thatdemand is low.• Small expansion with an occurrence of high demand wouldrequire considering whether to expand further. If thebusiness expands at that point, the profi tability is expectedto be $120,000. If it does not expand further, the profi tabilityis expected to be $70,000.Draw a decision tree and solve it. What should Jody’s CustomTailoring do?

Jody of Jody’s Custom Tailoring is considering expandingher growing business. Th e question is whether to expand with abigger facility than she needs or with a small facility, knowing thatshe will have to reconsider expanding in three years.Jody has estimated the following chances for demand:• Th e likelihood of demand being high is 0.50.• Th e likelihood of demand being low is 0.50. She has also estimated profi ts for each alternative:• Large expansion has an estimated profi tability of either$200,000 or $100,000, depending on whether demand turnsout to be high or low.• Small expansion has a profi tability of $80,000, assuming thatdemand is low.• Small expansion with an occurrence of high demand wouldrequire considering whether to expand further. If thebusiness expands at that point, the profi tability is expectedto be $120,000. If it does not expand further, the profi tabilityis expected to be $70,000.Draw a decision tree and solve it. What should Jody’s CustomTailoring do?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter5: Network Models

Section5.3: Assignment Models

Problem 12P

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pplease provide explaination as to why the other options are incorrect. thank you
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