A communication-electronics firm is deciding whether to manufacture a new communications device.

A communication-electronics firm is deciding whether to manufacture a new communications device. The decision to produce the device means an investment of $3M, and the demand for such a device is uncertain. Estimates of probability for the continuous randome variable, demand, are shown below:

P(Demand<$6M) = 0.9 (High)

P(Demand<$4M) = 0.5 (Med)

P(Demand<$1M) = 0.1 (Low)

A. Draw a decision tree for the problem. Compute the expected value of each alternative. Should the firm make the investment?

B. Determine the values of perfect information and control for demand.