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Assign5 solutions - 5. a. Stock Price Change Probability...

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Chapter 12 Simulation Solutions: 2. a. Let c = variable cost per unit x = demand Profit = 50 x - cx - 30,000 = (50 - c ) x - 30,000 b. Base case: Profit = (50 - 20) 1200 - 30,000 = 6,000 Worst case: Profit = (50 - 24) 300 - 30,000 = -22,200 Best case: Profit = (50 - 16) 2100 - 30,000 = 41,400 c. The possibility of a $41,400 profit is interesting, but the worst case loss of $22,200 is risky. Risk analysis would be helpful in evaluating the probability of a loss.
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Unformatted text preview: 5. a. Stock Price Change Probability Interval-2 .05 .00 but less than .05-1 .10 .05 but less than .15 .25 .15 but less than .40 +1 .20 .40 but less than .60 +2 .20 .60 but less than .80 +3 .10 .80 but less than .90 +4 .10 .90 but less than 1.00 b. Random Number Price Change Ending Price Per Share 0.1091-1 $38 0.9407 +4 $42 0.1941 $42 0.8083 +3 $45 Ending price per share = $45...
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This note was uploaded on 05/01/2011 for the course BUS 220 taught by Professor Drexel during the Fall '08 term at SUNY Stony Brook.

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