Problem 3 The Sweet Tooth Candy Company knows it will need 10 tons of sugar 6 months from now. The manager has two options for acquiring the needed sugar. She can either buy the sugar at the going market price when she needs it, 6 months from now, or she can buy a futures contract now. The contract guarantees delivery of the sugar in 6 months but the cost of the purchase will be based on today's market price. Assume that possible sugar futures contracts available for purchage are for 5 tons or 10 tons only. No future contracts can be purchased or sold in the intervening months. Thus, Sweet Tooth's possible decisions are: (1) purchase a future's contract for 10 tons of sugar now; (2) purchase a future's contract for 5 tons of sugar now, and purchase 5 tons of sugar in 6 months; or (3) purchase all 10 tons of needed sugar in 6 months. The price of sugar bought now for delivery in 6 months is $0.0851 per pound (notice the different between pound and ton!). The transaction costs (one-time fixed cost) for 5-ton and 10-ton futures contracts are $ 65 and $ 110, respectively. Finally, the manager has annessed the probability distribution for the possible prices of sugar 6 months from now (nee excel file). (*) Given that SweetTooth wants to acquire the needed sugar in the least costly way, formulate a con table that specifies the contociated with each possible decision and possible sugar price in the future. (b) Identify the decision that minimize the expected cost (e) Perform a sensitivity analysis on the best decision with respect to the current market price, ranging from $0.05 to $ 0.13, using a one-way data table SO 0051 565 $110 Purchasing sugar Inputs Current price of sugar (5/10) Transaction cost for 5-ton futures contract Transaction cost for 10 ton futures contract Distribution of price in 8 months Price Probability Decisions/Outcome Decision 1 Decision 2 Decision 3 307070 005 S008 0.25 S00187 0.35 500 02 SOTU9 0.15