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Bloom's Jeans is searching for new suppliers, and Debbie Bloom, the owner, has narrowed her choices to two sets. Debbie is very concerned about supply
Bloom's Jeans is searching for new suppliers, and Debbie Bloom, the owner, has narrowed her choices to two sets. Debbie is very concerned about supply disruptions, so she has chosen to use three suppliers no matter what. For option 1, the suppliers are wellestablished and located in the same country. Debbie calculates the "unique-event" risk for each of them to be 4%. She estimates the probability of a nationwide event that would knock out all three suppliers to be 2.5%. For option 2, the suppliers are newer but located in three different countries. Debbie calculates the "uniqueevent" risk for each of them to be 20%. She estimates the "super-event" probability that would knock out all three of these suppliers to be 0.4%. Purchasing and transportation costs would be $1,000,000 per year using option 1 and $1,010,000 per year using option 2. Atotal disruption would create an annualized loss of $500,000. a) The probability that all three suppliers will be disrupted using option 1 is D (round your response to ve decimal places)
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