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Machado Construction Is Considering Two Options for Its Supplier Portfolio

question 1

Essay

Machado Construction is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a "unique-event" risk of 8%, and the probability of a "super-even" that would disable both at the same time is estimated to be 2.5%. Option 2 uses two suppliers located in different countries. Each has a "unique-event" risk of 18%, and the probability of a "super-event" that would disable both at the same time is estimated to be 1.2%.
(a) What is the probability that both suppliers will be disrupted using option 1?
(b) What is the probability that both suppliers will be disrupted using option 2?
(c) Which option would provide the lowest risk of a total shutdown?


Definitions:

Oxytocin

A hormone released by the pituitary gland that causes increased contraction of the uterus during labor and stimulates the ejection of milk into the ducts of the breasts.

Uterine Smooth Muscle

The muscle tissue in the uterus, responsible for the contractions during menstruation and childbirth.

Digestive System

A group of organs working together to convert food into energy and basic nutrients to feed the entire body.

Body Weight

The measure of a person's mass or heaviness.

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