Question 2 An electronics firm is deciding whether to use one, two or three suppliers for the electronic components that go into its supply chain. The firm wants to use all local suppliers, instead of international suppliers, due to budget constraints. The factory of the firm locates in a coastal area which is prone to hurricanes. In the event of the hurricanes in any year, all suppliers are forced to shut down at the same time for at least two months, and the probability of this super-event is 4%. Such a total shutdown would cost the company $1,500,000. In addition, the "unique-event" risk for any of the suppliers is estimated to be 12%. Assume that the marginal cost of managing an additional supplier is $25,000 per year, how many local suppliers should the firm use? Solve the problem by constructing a decision tree diagram and applying the EMV criterion.