Assignment task: The Smith family wishes to build a new home on a budget of $320,000, and has received estimates for each of the construction components from the General Contractor, as given in the table on the attached document file. Make a simulated model of the construction costs, and use it to answer the questions below. Submit both a word document with the answers and a supporting Excel file OR a word document with the answers and screenshots of your simulation output graphs from @Risk.
You can access @Risk on the Krannert Virtual Server at remote.krannert.purdue.edu.
1. Based on the most likely cost estimates, what is the expected cost of the building the house with only the mandatory items, and how does it compare to the budget?
2. Simulate the cost of building the house in @Risk or similar software. What is the expected cost of building the house using this method? Which should the Smith family use to make a decision? Do not just describe the difference in methods, explain why the results are different (hint: is it ALWAYS the case that the results will be different?).
3. What is the probability that the Smiths will exceed their budget of 320K with only the mandatory items?
4. If the Smiths include all three of the optional items, how much would they need to budget to be 90% certain they could meet all costs?