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CoursHeroTranscribedText: (a) Spar Limited, a retail outlet, is faced with a decision regarding whether or not to expand and build small and large premises at a prime location. Small premises would cost P300 000 to build and large premises would cost P550 000. Regardless of the type of premises built, if high demand exists then the net income is expected to be P1 500 000. Alternatively, if low demand exists, then the net Income is expected to be P600 000. If large premises are built then the probability of high demand is 0.75. If the smaller premises are built then the probability of high demand falls to 0.6. Spar has the option of undertaking a survey costing P50 000. The survey products whether there is likely to be a good or bad response to the size of the premises. The likelihood of there being a good response, from previous surveys, has been estimated at 0.8. If the survey indicates a good response then the company will build the large premises. If the survey does give a good result then the probability that there will be high demand from the large premises increase to 0.95. If the survey indicates a bad response then the company will abandon all expansion plans Required: Using decision tree analysis, establish the best course of action for Spar Limited (19 marks)

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