$*$Please draw out the decision tree diagram for this question

Sony sells its $4$K OLED TV primarily in United States. Demand in the United States market is currently on average $115,0004$K OLED TV per year, and each $4$K OLED TV sells for on average $$1550.$ Although $4$K OLED TV demand is expected to grow, there are some downside risks if the economy slides. From one year to the next, demand may increase by $30$ percent, with probability $0\mathrm{.}75,$ or decrease by $30$ percent, with probability $0\mathrm{.}25.$

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Sony has to decide whether to build a plant in US or Mexico. In either case, Sony plans to build a plant with a rated capacity of $130,000$ panels. The fixed and variable costs of the two plants are shown in Table $2$ below.

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US Plant

Mexico Plant

Fixed cost $($$$)$

Variable Cost $($$$)$

Fixed cost $($MXN Peso$)$

Variable Cost $($MXN Peso$)$

$2$ million$/$year

$500/4$K OLED TV

$3\mathrm{.}6$ million$/$year

$1050/4$K OLED TV

Observe that the fixed costs are given per year rather than as a one$-$time investment. The US plant is more expensive but will also have greater volume flexibility. The plant will be able to increase or decrease production anywhere in the range of $80,000$ to $130,000$ panels while maintaining its variable cost. If the US plant is built and the demand exceeds $130,000$ Sony will have to lose sales.

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In contrast, the Mexican plant is cheaper $($at the current exchange rate of $18\mathrm{.}5$ Peso$/$$$)$ but will have limited volume flexibility and can produce only between $95,000$ and $120,000$ panels. If the Mexican plant is built, Sony will have to incur variable cost for $95,000$ panels even if demand drops below that level and will lose sales if demand increases above $120,000$ panels. Exchange rates are volatile; each year, the MXN Peso is expected to rise $15$ percent, with a probability of $0\mathrm{.}65,$ or drop $15$ percent, with a probability of $0\mathrm{.}35.$ Assuming that the sourcing decision will be in place over the next three years and the discount rate used by Sony is $15\%.$ Consider the first year as period $0$ and the following two years as periods $1$ and $2.$

Draw the Decision Tree for this problem.

Sony sells its $4$K OLED TV primarily in United States. Demand in the United States market is currently on average $115,0004$K OLED TV per year, and each $4$ K OLED TV sells for on average $$1550.$ Although $4$K OLED TV demand is expected to grow, there are some downside risks if the economy slides. From one year to the next, demand may increase by $30$ percent, with probability $0\mathrm{.}75,$ or decrease by $30$ percent, with probability $0\mathrm{.}25.$

Sony has to decide whether to build a plant in US or Mexico. In either case, Sony plans to build a plant with a rated capacity of $130,000$ panels. The fixed and variable costs of the two plants are shown in Table $2$ below.

US Plant Mexico Plant Fixed cost $($$$)$ Variable Cost $($$$)$ Fixed cost $($MXN Peso$)$

Variable Cost $($MXN Peso$)$

$2$ million$/$year $500//4$ K OLED TV $3\mathrm{.}6$ million$/$year $1050//4$ K OLED TV

Observe that the fixed costs are given per year rather than as a one$-$time investment. The US plant is more expensive but will also have greater volume flexibility. The plant will be able to increase or decrease production anywhere in the range of $80,000$ to $130,000$ panels while maintaining its variable cost. If the US plant is built and the demand exceeds $130,000$ Sony will have to lose sales.

In contrast, the Mexican plant is cheaper $($at the current exchange rate of $18\mathrm{.}5$ Peso$/$$$)$ but will have

limited volume flexibility and can produce only between $95,000$ and $120,000$ panels. If the Mexican

plant is built, Sony will have to incur variable cost for $95,000$ panels even if demand drops below that

level and will lose sales if demand increases above $120,000$ panels. Exchange rates are volatile; each

year, the MXN Peso is expected to rise $15$ percent, with a probability of $0\mathrm{.}65,$ or drop $15$ percent, with a

probability of $0\mathrm{.}35.$ Assuming that the sourcing decision will be in place over the next three years and

the discount rate used by Sony is $15\%.$ Consider the first year as period $0$ and the following two years

as periods $1$ and $2.$