A local supermarket is planning to expand its business. There are three possible options:

A local supermarket is planning to expand its business. There are three possible options: 
•    • Option 1: set up a new store, 
•    • Option 2: develop online shopping, or 
•    • Option 3: expand the current store. 
A consultant estimated that setting up a new store will cost $600,000, developing online shopping will cost $200,000 and expanding the current store will cost $300,000. The potential revenues in the future 3 years together with the estimated probabilities are given in the Table below: 
Option     Revenue ($)     Probability (%) 
Option 1     1,100,000     30 
    700,000     70 
Option 2     700,000     20 
    500,000     60 
    400,000     20 
Option 3     800,000     55 
    600,000     45 
Use these data and the decision tree analysis technique to determine which of the options is preferable. Your solution should include a well-labelled decision tree, all relevant calculations, your decision and a clear justification of your decision. [NOTE: it is not necessary for the explanation to be lengthy, but it must be correct and easily understood.] 
(10 marks) 


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