A consultant estimated that setting up a new store will cost $600,000,

Referencing Styles : APA A local supermarket is planning to expand its business. There are three possible options: • • Option 1: set up a new store, • • Option 2: develop online shopping, or • • Option 3: expand the current store. A consultant estimated that setting up a new store will cost $600,000, developing online shopping will cost $200,000 and expanding the current store will cost $300,000. The potential revenues in the future 3 years together with the estimated probabilities are given in the Table below: Option Revenue ($) Probability (%) Option 1 1,100,000 30 700,000 70 Option 2 700,000 20 500,000 60 400,000 20 Option 3 800,000 55 600,000 45 Use these data and the decision tree analysis technique to determine which of the options is preferable. Your solution should include a well-labelled decision tree, all relevant calculations, your decision and a clear justification of your decision. [NOTE: it is not necessary for the explanation to be lengthy, but it must be correct and easily understood.] (10 marks) .

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