A manufacturing company is considering expanding its production capacity to meet a growing demand for its product line of air fresheners. The alternatives are to build a new plant, expand the old plant, or do nothing. The marketing department estimates a 35 percent probability of a market upturn, a 40 percent probability of a stable market, and a 25 percent probability of a market downturn. Georgia Swain, the firm's capital appropriations analyst, estimates the following annual returns for these alternatives: Market Upturn Stable Market Mark
Market Stable Marke Market Downturn S690,000 (S130,000) (S150,000) Build new plant 490,000 -45,000 -65,000 Expand old plant Do nothing S0.000 0 -20.000

a) Use a decision tree analysis to analyze these decision alternatives. b) What should the company do? c) What returns will accrue to the company if your recommendation is followed?