# Brandon is considering expansion of a store. If he expands, the interest rate at which he borrows the money is the important factor. He is not sure what kind of interest rate will be obtained. If he does not expand, the only factor influencing the outcome is future economy. The following table summarizes the situation:                                                                         Probabilities          Payoff   Expand Large                        Favorable interest               .3             $60k Neutral interest .5$30k                                 Unfavorable interest           .2             ‑$70k Expand Small Favorable interest .3$50k                                 Neutral interest                   .5             $30k Unfavorable interest .2 ‑$30k   Do not expand                      Economy up                          .3             $30k Economy same .5$20k                                 Economy down                    .2             $0 Draw the decision tree showing all nodes and expected values. Use square for decision node, and circle for chance node. What should he do? Question 1. Brandon is considering expansion of a store. If he expands, the interest rate at which he borrows the money is the important factor. He is not sure what kind of interest rate will be obtained. If he does not expand, the only factor influencing the outcome is future economy. The following table summarizes the situation: Probabilities Payoff Expand Large Favorable interest .3$60k

Neutral interest                   .5             $30k Unfavorable interest .2 ‑$70k

Expand Small                        Favorable interest               .3             $50k Neutral interest .5$30k

Unfavorable interest           .2             ‑$30k Do not expand Economy up .3$30k

Economy same                     .5             $20k Economy down .2$0

Draw the decision tree showing all nodes and expected values. Use square for decision node, and circle for chance node. What should he do?