Reference no: EM132758122

Question: Suppose that you can select between an overseas supplier and a local supplier. To start the business you borrowed $300,000 at an interest of 15% and bought machine for $185,000. If the local supplier employs 4,000 labor at $25.00 each, while the oversea supplier employs 2000 labor at $30.00 each. Annual warehouse rental for both local and oversea supplier were $20,000 each. The oversea supplier spend $15,000 for materials while the local supplier spends $27,000. The local supplier pays $3,000 for electricity, phone and internet service and the oversea supplier pays $5,000 for same services. Assume that the product supplied is identical from each supplier and that you expect to sell 1,000 units at a price of $400 each. The overseas supplier has a .25% chance of failing to deliver the product, while the local supplier has a .025 probability of failure to deliver the product. What are the expected value and variance of your profit if you choose both suppliers?