Decision Trees For Decision-making

Stygian Chemical Industries, Ltd. is faced with a decision of whether to build a small or large plant to manufacture a new product with an expected market life of 10 years. The decision is dependent on the size of the market for the product. If demand is high, the company must expand within the first two years or risk competitors entering the market. If the company builds a small plant, they have the option of expanding in two years if demand is high. The development department is pushing for the large-scale plant, while the chairman is wary of the possibility of large unneeded plant capacity and favors a smaller plant commitment.