Note Discount factor K = 0.2

Moon Micro is a small manufacturer of servers in Santa Clara, California. Lately, the demand for servers has increased, and the company needs to find a way to capitalize on the situation. The current plant has reached its maximum capacity of 10,000 units because of the increasing demand (10,000 is the current demand). The two options to capitalize on the situation are to either expand the plant to a capacity of 20,000 units (add 10,000 to the existing capacity; Note this option may have unmet demand) or outsource the process to Molectron, an independent assembler. Expanding the Santa Clara plant would have an annualized fixed cost of $10,000,000 plus $500 labor per server plus the $8000 per server for raw materials. Hiring Molectron would cost $2000 (excluding raw materials cost) per server built. The raw material cost per server is the same for both options The outsourcing option (hiring Molectron) will be available to use at the beginning of the second year if selected. Moon Micro sells its servers for $15,000. Given the situation, Moon Micro wants to have projections for the next two years (years 2 and 3). For both years, the company estimates demand for servers to have an 80% chance of increasing 50% from the previous year, and a 20% chance of staying the same as the year before. On the other hand, Molectron's prices are fixed for the first year (year 2 in this problem) but have a 50% chance of increasing 20% in the second year (year 3 in this problem) and a 50% chance of staying at the current rate. Assuming all costs are incurred at the beginning of the year. Use discount factor k=0.2. Step 1. (10 points): Please help this company draw the decision tree clearly Step 2. (20 points): Use the decision tree in step 1 to determine whether Moon should add capacity to its Santa Clara plant or if it should outsource to Molectron. What are some other factors that we have not discussed that would affect the decision? Moon Micro is a small manufacturer of servers in Santa Clara, California. Lately, the demand for servers has increased, and the company needs to find a way to capitalize on the situation. The current plant has reached its maximum capacity of 10,000 units because of the increasing demand (10,000 is the current demand). The two options to capitalize on the situation are to either expand the plant to a capacity of 20,000 units (add 10,000 to the existing capacity; Note this option may have unmet demand) or outsource the process to Molectron, an independent assembler. Expanding the Santa Clara plant would have an annualized fixed cost of $10,000,000 plus $500 labor per server plus the $8000 per server for raw materials. Hiring Molectron would cost $2000 (excluding raw materials cost) per server built. The raw material cost per server is the same for both options The outsourcing option (hiring Molectron) will be available to use at the beginning of the second year if selected. Moon Micro sells its servers for $15,000. Given the situation, Moon Micro wants to have projections for the next two years (years 2 and 3). For both years, the company estimates demand for servers to have an 80% chance of increasing 50% from the previous year, and a 20% chance of staying the same as the year before. On the other hand, Molectron's prices are fixed for the first year (year 2 in this problem) but have a 50% chance of increasing 20% in the second year (year 3 in this problem) and a 50% chance of staying at the current rate. Assuming all costs are incurred at the beginning of the year. Use discount factor k=0.2. Step 1. (10 points): Please help this company draw the decision tree clearly Step 2. (20 points): Use the decision tree in step 1 to determine whether Moon should add capacity to its Santa Clara plant or if it should outsource to Molectron. What are some other factors that we have not discussed that would affect the decision