Case study for Discounted cash flow analysis- Extra credit: 3 points directly added to your total AM TIRES: EVALUATION OF SUPPLY CHAIN DESIGN DECISIONS UNDER UNCERTAINTY AM tires faces a plant location decision in a global network with fluctuating exchange rates and demand uncertainty. AM Tires sells its products in both Mexico and the United States. Demand in the United States is currently 100,000 tires per year, and that in Mexico is 50,000 tires per year. From one year to the next, demand in either country may increase by 20 percent with probability 0.5 or decrease by 20 percent with probability 0.5. Demand fluctuations in the two countries are independent. A tire sells for $30 in the United States and 240 pesos in Mexico. The current exchange rate is $1 uS =9 pesos. Exchange rates are expected to fluctuate according to the binomial distribution. From one year to the next, the peso may rise 25 percent or drop 25 percent, each with a probability of 0.5. Exchange ate fluctuations are independent of demand fluctuations. AM Tires is designing its manufacturing network, which will be in place for two years. The company is planning to build a 100,000-unit plant in the United States and a 50,000-unit plant in Mexico. The plants may be dedicated, in which case they can only supply the local market, or flexible, in which case they can supply either market. The fixed and variable costs for each option are shown in the following Table Observe that the fixed costs are given per year rather than up front with a future salvage value. Transportation costs between the United States and Mexico are $1 per tire either way. The plant decision has to stay in place over the next two years and the discount rate used by AM Tires is k=0.1. The vice president of operations at AM Tires is working with the CEO to decide on the type of facility to bulld in each location. The company is bound by agreements (with each local government) to bulld a piant in each country. Design the decision tree and plant configuration if the capacity is considered flexible for both facilities