--%>
Assignment Help - homework help

Mascot Simulation

Simulation with Crystal Ball


Provided Workbook: Mascot Simulation
Relevant Readings:"Discounted Cash Flow Modeling" folder + Textbook Chapter 4.
This is an individual assignment.

 


Mascot Industries (B)


Consider Mascot's investment decision modeled in HW2.
Mascot now realizes that some of the assumptions made are not quite correct.

For example, the projected receivables for both machines are rather unreliable. It is likely that such projections will diverge significantly from their originally estimated 4-year mean. A normal distribution around the mean, with twice the originally predicted 4-year standard deviation, sounds reasonable to reflect such uncertainty.

Also, the purchase price of the new machine is not guaranteed. Most likely, Mascot will pay the originally estimated amount but it is possible that the price be as low as $240,000 or as high as $270,000. Mascot agrees that the uncertain purchase price should follow a triangular distribution.

Mascot's CFO wants to evaluate how these uncertain variables might affect the project's net present value.


Using Crystal Ball, run a simulation in Workbook "Mascot Simulation B" and provide answers to the following questions. Make sure that you copy the full report of your simulation in a separate worksheet.
You will also be asked to load your spreadsheet at the end of this assignment.

Questions.
Using the distributions described above, set up a simulation in the "Crystal Ball Model B" worksheet.
Run 10,000 trials and attach the full report in a worksheet called "simulation B".

In the "Interpretation" worksheet, provide answers to the following questions:

1) Based on simulation results, are you 100% confident that Mascot should acquire the new machine? Explain.
2) How much effort should Mascot allocate at securing the lowest possible purchase price for the new machine? Explain using the simulation results.

   Related Questions in Finance Basics

  • Q : What is the efficiency factor Normal 0

    Normal 0 false false

  • Q : State Section 8.50 Section 8.50 : The

    Section 8.50: The Control Section of Budget Act gives the authority to raise federal funds expenses authority.

    		•
  • Q : Financing costs in capital budgeting

    How are financing costs incorporated generally into the capital budgeting analysis procedure? Usually financing costs are captured in the discount or hurdle rate while doing NPV or IRR analysis. Usually the operating cash flows do not comprise

    		•
  • Q : What is Budget Act Budget Act (BA): The

    Budget Act (BA): The annual statute authorizing state departments to use up appropriated funds for the aims stated in the Governor's Budget and improved by the Legislature.

    		•
  • Q : Why do businesses spend efforts to

    Why do businesses spend effort, time and money to generate forecasts?  Describe.Businesses succeed or fail based on how well prepared they are to deal along with the situations they confront in the future. Hence they expend considerable sum

    		•
  • Q : What is Capital Outlay Capital Outlay

    Capital Outlay (CO): A character of expenses of funds to obtain land, plan and build new buildings, expand or transform existing buildings, and/or purchase tools associated to such construction.

    		•
  • Q : Companies benefit most from stronger

    What type of U.S. companies would benefit most from a stronger dollar in the foreign exchange market? Describe. U.S. companies which import goods from other countries would benefit from a stronger dollar. More units of foreign currency could b

    		•
  • Q : What is Prior Year Adjustment Prior

    Prior Year Adjustment: An adjustment for the difference among prior year accruals and real expenditures or revenues. The previous year adjustment amount is usually comprised in the Fund Condition Statements as an adjustment to realign the starting fun

    		•
  • Q : Explain 3-year Expenditures and

    3-year Expenditures and Positions: The display at the beginning of each departmental budget which presents the different departmental programs by title, dollar totals, places, and source of funds for the past, current, and budget years.

    		•
  • Q : Resolving ranking conflict Describe how

    Describe how to resolve a "ranking conflict" among the net present value and the internal rate of return. Why should the conflict be resolved as you described? Whenever there is a ranking conflict among net present value and internal rate of re

    		•