Moon Micro

Current Capacity 10,000 Option 1: Add capacity to Santa Clara

Price/Server $15,000 Extra Capacity 10,000
Raw Mat'l/Server $8,000 Fixed Cost $10,000,000
Labor/server $ 500

Option 2: Outsource to Molectron

Cost/server $2,000

Past Year Year 1 Year 2

Probability
wrt to
previous year
0.40 Demand
Molectron cost/server
Probability
wrt to
previous year 0.40 Demand
0.80 Demand up 15,000 Molectron cost/server

0.10 Demand
Molectron cost/server

0.10 Demand
Molectron cost/server

Servers Sold 10,000

0.40 Demand
Molectron cost/server

0.40 Demand
0.20 Demand same 10,000 Molectron cost/server

0.10 Demand
Molectron cost/server

0.10 Demand
Molectron cost/server
 Revenue and cost computations

Probability Option 1 Option 2

wrt to now Contribution to
First year Second year 2-year profit

22,500 0.32 Revenue $75,000,000 $150,000,000

$ 2,000 Cost 52,500,000 95,000,000
Profit $22,500,000 $55,000,000 $24,800,000

22,500 0.32 Revenue $75,000,000 $150,000,000

$ 2,400 Cost 52,500,000 95,000,000
Profit $22,500,000 $55,000,000 $24,800,000

15,000 0.08 Revenue $75,000,000 $75,000,000

$ 2,000 Cost 52,500,000 52,500,000
Profit $22,500,000 $22,500,000 $3,600,000

15,000 0.08 Revenue $75,000,000 $75,000,000

$ 2,400 Cost 52,500,000 52,500,000
Profit $22,500,000 $22,500,000 $3,600,000

15,000 0.08 Revenue $0 $75,000,000

$ 2,000 Cost 10,000,000 52,500,000
Profit ($10,000,000) $22,500,000 $1,000,000

15,000 0.08 Revenue $0 $75,000,000

$ 2,400 Cost 10,000,000 52,500,000
Profit ($10,000,000) $22,500,000 $1,000,000

10,000 0.02 Revenue $0 $0

$ 2,000 Cost 10,000,000 10,000,000
Profit ($10,000,000) ($10,000,000) ($400,000)

10,000 0.02 Revenue $0 $0

$ 2,400 Cost 10,000,000 10,000,000
 Profit ($10,000,000) ($10,000,000) ($400,000)

Total 1.00 Expected profit with option 1 $58,000,000