Scientific ReasoningScience is one of the most successful endeavors of mankind. Through the power of reason and careful observation, humans have found out how to get to the moon, cure….
What should E-Education do? (Solve this problem using Decision Tree. Please show your work: decision tree, calculations of each alternative, and results)
Intro) E-Education is a new start-up that develops and markets MBA 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 leases 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 about the alternatives and current situation:
1. The company has a 75 percent chance of surviving the next two years.
2. Leasing the new space for two years at the current location in Chicago would cost $750,000 per year.
3. Moving the entire operation to a Midwest town would cost $1 million. Leasing space would run only $500,000 per year.
4. Moving to a new building in Chicago would cost $200,000, and leasing the new building’s space would cost $650,000 per year.
5. The company can cancel the lease at any time.
6. The company will build its own building in five years, if it survives.
7. Assume all other costs and revenues are the same no matter where the company is located.
Note: To draw your decision tree, you can use this software <link is hidden>
Submit your answers in this Excel file and PDF file results of Silverdecisions to the individual assignment 9.
Q) What should E-Education do? (Solve this problem using Decision Tree. Please show your work: decision tree, calculations of each alternative, and results)
Step 1: Construct a decision tree that considers all of E-Education’s alternatives.
Step 2: Calculate the values of each alternative