Apart from preparing a marketing plan to improve the sale and increase the market share, Massimo Malaysia is also planning to open a new outlet to be...

High: 0.2 $450,000 per annum for two years

Medium: 0.5 $400,000 per annum for two years

Low: 0.3 $350,000 per annum for two years

If it is a failure, there is a 0.6 probability that the research and development work can be sold for $50,000 and a 0.4 probability that it will be worth nothing at all.

However, for Damansara outlet, the chances for success will be 60% and the chance of failure is 40%. If it is successful, the levels of expected profits and the probability of each occurring have been estimated as follows;

Probability Profits

High: 0.3 $500,000 per annum for two years

Medium: 0.4 $450,000 per annum for two years

Low: 0.3 $400,000 per annum for two years

If the project fails, there is a 0.6 probability that the research and development work can be sold for $50,000 and a 0.4 probability that it will be worth nothing at all.

Construct a decision tree for the above investment alternatives and determine all the probabilities suggested in the marketing plan.

Calculate the expected value of both outlets?

Which of these outlets should Massimo develop to expand its business in Malaysia?