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E-Education is a new start-up that develops and markets their courses offered over the internet. The company is currently located in Chicago and employs 150 people. Due to strong growth, the company needs additional office space. The company has the option of leasing additional space at its current location in Chicago for the next two years, but after that will need to move to a new building. Another option the company is considering is moving the entire operation to a small Midwest town immediately. A third option is for the company to lease a new building in Chicago immediately. If the company chooses the first option and lease new space at its current location, it can, at the end of two years, either lease a new building in Chicago or move to the small Midwest town. The following are some additional facts.

a) The company has a 75% chance of surviving the next two years.
b) Leasing the new space for two years at the current location in Chicago would cost 750,000 per year.
c) Moving the entire operation to a Midwest town would cost $1 million. Leasing space would run only $500,000 per year.
d) Moving to a new building in Chicago would cost $200,000 and leasing the new building's space would cost $650,000 per year.
e) The company can cancel the lease at any time.
f) The company will build its own building in 5 years, if it survives.
g) Assume all other costs and revenues are the same no matter where the company is located.

What should E-Education do - (Create a decision tree and an influence diagram)?

Operation Management, Management Studies

  • Category:- Operation Management
  • Reference No.:- M986450

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