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8- A company specialized in polymers is experiencing substantial short raw material. The company is contemplating...

8- A company specialized in polymers is experiencing substantial short raw material. The company is contemplating 4 courses of action:

A) Local Outsource
B) Hire in the Dominican Republic
C) Expand
D) Do nothing

The decision will be based on demand, which can be low, moderate or high. Management has established the respective probabilities of demand at: 0.25, 0.50, and 0.25.

Management also established profit estimates for the 4 alternatives (A, B, C, and D) based on the estimated levels of activity. These gains, in thousands of dollars are as follows:

Baja

Moderada   

Alta

Alternative/Probability  

.25

.50

.25

A

15

60

100

B

18

50

90

C

-90

30

210

D

30

50

70

Build the decision tree and determine the best decision.

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