2. ABC Corporation is considering 3 options for managing its data processing operations. a. Continue with its own staff b. Hire an outside vendor c. Use a combination of own staff and an outside vendor The cost of operation depends on future demand.

2. ABC Corporation is considering 3 options for managing its data processing operations. a. Continue with its own staff b. Hire an outside vendor c. Use a combination of own staff and an outside vendor The cost of operation depends on future demand. The annual cost of each option (in thousands of INR) depends on demand as follows: Staffing Option Demand High Medium Low Continue with its own staff 650 650 600 Hire an outside vendor 900 600 300 Use a combination of own staff and an outside vendor 800 650 500 If the demand probabilities are 0.2, .05 and .03 for high, medium and low respectively; which decision alternative will minimize the expected cost of the data processing operations? What is the value associated with your recommendation? (Hint: Construct the decision tree to calculate the value. Note that the minimum value is required)

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