I copy and paste again. But this is the question I have. I haven't altered anything by myself. It would be nice if you provide answer with this. I am struggling with the probability factor. So please explain that very well in answer.

1. R & L Co. Ltd., a Canadian exporting and consulting firm specializing in servicing agricultural farms, has a contract to supply special tree seedlings to an experimental farm in North-East Africa. R & L normally bought tree seedlings from Green Nurseries Ltd. and air freighted them to them to their final destination. Green Nurseries was one of the largest nurseries in Canada and was partially government funded. Normally, the Canadian forestry departments used up about 50% of Green Nurseries annual volume of seedlings available; the rest were sold on a first-come, first-served basis.

Mr. Rolly, a senior partner of R & L, was the only employee who had been working on the African experimental farm contract. He had recently been notified that the farm was ready to receive seedlings for planting; however, soil tests were still required in order to determine the proportion of the available acreage which would be suitable for planting. Upon receiving this notification, Mr. Rolly left for Africa in order to supervise the soil test and thereby determine with certainty the volume of seedlings which the farm would require. Before leaving, he briefly outlined the situation to Mr. Lewis, the other R & L partner, indicating that there was a 60% chance that the soil tests would be favourable (high proportion of acreage suitable for planting). He also provided the contract file to Mr. Lewis, which contained the following information:

COST DATA

Cost per seedling from Green Nurseries	$0.55
Handling and transportation cost per seedling	$1.85
Expenses incurred in attaining the contract to date (excluding soil-testing trip to Africa)	$7,800
Two-way flight cost for soil-testing" trip	$1,400
Expected cash outlays to complete the contract other than seedling purchases, handling, and transportation	$10,000

SALES DATA

Soil Test Result (Probability)	Selling Price per Seedling	Sales Volume (Number of Seedlings)	Probability
Favourable (p = 0.6)	$3.00	45,000	0.2
		40,000	0.4
		35,000	0.4
Unfavourable (p = 0.4)	$3.20	30,000	0.4
		25,000	0.4
		20,000	0.2

Before Mr. Rolly left for Africa, he was assured by Green Nurseries that it would be able to supply any quantity of seedlings required by R & L to fill the African contract. In turn, Mr. Rolly assured Green Nurseries that, once the soil test results became available, a firm order would be made immediately.

REQUIRED:

Calculate the probability of at least breaking even on this contract

if the results of the soil tests are unfavourable. (6 marks)

2. The day after Mr. Rolly left for Africa, a provincial forestry department placed an extraordinarily large order for the special seedlings to reforest several areas which were devastated by fire. This left Green Nurseries with a total remaining inventory for the year of 40,000 seedlings. Remembering his promise to Mr. Rolly, the manager of Green Nurseries immediately called R & L and informed Mr. Lewis that R & L would have to place a firm order for either 40,000 seedlings or 25,000 seedlings by the next day; otherwise, Green Nurseries would supply the seedlings to another customer. He also indicated that the order would be non-cancellable and refunds would not be allowed.

Faced with these conditions and the knowledge that the soil test results would not be available for at least three days, Mr. Lewis decided to search for an alternative source for the seedlings. He discovered that other nursery chains would be able to supply up to 20,000 seedlings over the next four weeks, but R & L would have to pay $0.90 for each seedling.

REQUIRED:

If profit maximization is the only objective, determine Mr.

Lewiss most favourable course of action. Support your answer

with calculations. Assume that R& L would not be able to recover

the purchase cost for any surplus seedlings. (14 marks)