Question: Draw and solve the decision tree for the following scenario.

A business is faced with a choice of expanding in Town A, Town B, or doing nothing at all. Company A’s expansion will cost $100K with probability of high return, $500K, equal to .4; low return $100K p=.6. If the return was high, and additional $50K could be invested with p=.9 of $200K return; p=.1 of $200K return.

In Company B the investment would be $250K with p=.8 of a $750K return, p=.2 of a $200K return.