Capacity Expansion Decision Tree Analysis

Group 6 :
Annisaa Dwi Utami – 26121116

Triyanto Ariwibowo 29121004

Melissa Marta 29121072

Clive Hosea Suryaputra 29121132

Isrianto Kurniawan 29121185

 1. NBM Furniture Large Sales
Revenue – Expand Cost = $200,000
0.67

Large Process Line

$100,000

Low Sales
Revenue – Expand Cost = -$ 100,000

0.33
NBM Furniture
$100,000 Low Sales
Revenue – Expand Cost = $0
0.33

Not Expand
Revenue – Expand Cost 1= $100,000
Small Process Line
$67,000

Large Sales
100,000
0.67

Based on decision tree analysis, we conclude that the Expand Line

higher profit is given when large process is selected.
So, company should choose a large process line
Revenue – Expand Cost 1 – Expand
expansion.
Cost 2 = $50,000
 2. Property Contractor

Not Rezoned
Revenue – Cost of Land = $ 400,000
0.4

$160,000 Department
Store
Revenue – Cost of Land –
Property Contractor 0.7
Electricity & Roads = $ 1,000,000
$532,000
Build Shopping Center $1,300,000

Insurance
Revenue – Cost of Land –
0.3 Electricity & Roads = $2,000,000
Rezoned
$1,300,000
Real Estate
0.6 Revenue – Cost of Land –
$780,000 0.6 Electricity & Roads = $1,500,000

Build 1500 Apartment

$900,000
Based on decision tree analysis, we conclude that the
higher profit is given when the property contractor
Construction
choose to rezone the area and build Shopping center
Revenue – Cost of Land –
instead of building apartment. The expected 0.4 Electricity & Roads = $0
monetary value will be $532,000.