Refer to the following paragraphs for answering the next 5 questions (i.e., Q6-10): Powercat, a manufacturer of electronic components, is trying to select a single supplier for the raw materials that go into its main product, the Purplecap. This is a new capacitor that is used by cellular phone manufacturers to protect microprocessors from power spikes. Two companies can provide the necessary materials - Multichem (i.e., Option 1) and Mixemat (i.e., Option 2). Multichem has a solid reputation for its products and charges a higher price because of its reliability of supply and delivery. Multichem dedicates plant capacity to each customer, and therefore supply is ensured. This allows Multichem to charge $1.20 for the raw materials used in each Purplecap. Mixemat is a small raw materials supplier that has limited capacity but charges only $0.90 for a unit's worth of raw materials. Its reliability of supply, however, is in question. Mixemat does not have enough capacity to supply all its customers all the time. This means that orders to Mixemat are not guaranteed. In a year of high demand for raw materials, Mixemat will have 90,000 units available for Powercat. In low-demand years, all product will be delivered. If Powercat does not get raw materials from suppliers, it needs to buy them on the spot market to supply its customers. Powercat relies on one major cell phone manufacturer for the majority of its business. Failing to deliver could lead to losing this contract, essentially putting the firm at risk. Therefore, Powercat will buy raw material on the spot market to make up for any shortfall. Spot prices for single-lot purchases (such as Powercat would need) are $2.00 when raw materials demand is low and $4.00 when demand is high. Demand in the raw materials market has a 75 percent chance of being high each of the next two years (i.e., Year 1 and Year 2). Powercat sold 100,000 Purplecaps last year and expects to sell 110,000 this year. However, there is a 25 percent chance it will sell only 100,000. Next year, the demand has a 75 percent chance of rising 20 percent over this year and a 25 percent chance of falling 10 percent. Powercat uses a discount rate of 20 percent. Assume all costs are incurred at the beginning of each year (Year 1 costs are incurred now and Year 2 costs are incurred in a year) and that Powercat must make a decision with a two-year horizon. Question 8 If "down & up", how much is the expected cost of Option 1 as of Year 0 (i.e., NPV)? $131,250 $196,042 $200,000 $307,083 Question 9 If "down & down", how much is the expected cost of Option 2 as of Year 0 (i.e., NPV)? $131,250 $196,042 $200,000 $307,083 Question 10 Based on a decision tree analysis, which supplier should Powercat choose? Multichem (i.e., Option 1) Mixemat (.e., Option 2) Two options provide the same expected cost