Tips for Modeling Questions:

• Question 2: Construct your decision tree based on only demand and Molectron’s price per server (excluding raw materials). Note that the current demand is 10000 as the company has currently reached to its full capacity. Also, Molectron’s price is currently 2000 (per server) . Note that Molectron’s price does not add any node to Period 1 but will impact period 2. For each option (i.e., expanding and outsourcing), compute the total profit (total revenue- total cost) for Period 2, then Period 1, and finally Period 0. Note that return/discount/inflation rate is 0%.
• Question 3: Construct your decision tree based on only MRO spending (without considering commission). For each option (i.e., AllMRO and Parts4u), compute the total commission cost for Period 2, then Period 1, and finally Period 0. To do so, consider 1% commission for ALLMRO and 5% commission for Parts4u. Note that you should add $10m to the total commission cost of AllMRO at period 1 before making any conclusions about which option is the best choice. Note that return/discount/inflation rate is 20%.