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Category > Management Posted 10 Jul 2017 My Price 13.00

virtual reality goggles

5. Fast Company sells virtual reality goggles and is expecting rapid growth. To convince angels to invest $500,000, they need to show consistent profits and growth for the next five years. They used the Delphi Method to build their forecasts, but there are risks and uncertainties they need to understand. See the table above for their One data:

Total Demand, units

50,000

Market Share

20%

Sale Price per unit

$179.99

Marketing Costs

$700,000

Research & Development Costs

$500,000

Variable costs per unit sold

$70.00

Overhead costs

$250,000

 

Forecasts:

· Demand for the product is forecast to increase each year following a triangular distribution with a best case of 20% per year, most likely case of 15%, and worst case of 5%. (5%/15%/20%)

· Market share is expected to grow uniformly between 5% and 12% per year.

· The group opinion is that the price Fast can charge can only increase slowly due to competition. The annual increase is normally distributed with a mean of $10.00 and a standard distribution of $2.5.

· R&D costs will decrease following a uniform distribution of 8 to 12% per year.

· Variable unit costs will increase following a triangular distribution of 1/3/7%.

· Overhead costs will increase following a normal distribution (10%,3%).

· Marketing costs will increase each year at a rate that is normally distributed (10%, 5%).

Build an Excel model and run 5,000 simulation trials.

a. Find the year Two through Year Five-year cumulative profit

b. Generate and properly label a trend chart showing profits by year.

c. Calculate the 95% confidence intervals around each year’s profit forecast.

d. What is the probability they will make a profit in year 2?

e. What is the probability the cumulative five-year profit will exceed $2,000,000?

f. What cumulative five-year profit can you be 95% sure Fast will achieve?

Remember the basic model is Revenue - Cost = Profit. All Charlie company’s revenue on this project flows from sales of the goggles. All costs are shown in the Year One data.

Notice: Because Excel does not provide a triangular distribution function, two calculators are provided on the M8A1_Part_2spreadsheet.

Answers

Maurice Tutor
(5)
Status NEW Posted 10 Jul 2017 06:07 AM My Price 13.00

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