If you are given a choice to decide whether to buy a new manufacturing operation of one of your competitors in order to expand business. The choices are to buy the complete operation, only the property, or not o buy anything. The results in Rands are summarised in the following table:
|
Demand
|
Decision
|
|
Complete Company
|
Property Only
|
Nothing
|
|
High
|
200000
|
100000
|
20000
|
|
Medium
|
120000
|
75000
|
60000
|
|
Low
|
50000
|
40000
|
140000
|
Assuming that the probabilities of high demand, medium and low are 0,4 ; 0,5; and 0,1 respectively.
Economic forecasters anticipate high demand. In the past, if high demand was forecasted, the demand was high 50 % of the time, medium 30 % of the time and low 20 % of the time.