--%>
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 : Explain working of accounts receivable

    Explain working of accounts receivable factoring? And describe benefits to the two parties involved and risks? Factoring is while one firm sells accounts receivable (AR) to another. The purchasing firm is termed as a factor. The factor earns

    		•
  • Q : Describe depreciation expense Describe

    Describe depreciation expense as it seems on the income statement.  Accounting depreciation is the allocation of asset's primary cost over time. Depreciation cost on an income statement is the amount of the asset=s initial cost allocated to

    		•
  • Q : Describe working capital Describe

    Describe working capital? Working capital contains the current assets of the firm.

    		•
  • Q : What is the Character of Expenditure

    Character of Expenditure: A classification recognizing the major purpose of expenditure, like State Operations, Local Assistance, Capital Outlay, or Unclassified.

    		•
  • Q : Describe the benefits of paying late

    Describe the benefits of "paying late" (but not too late) and how do companies try to do this? Since money has time value, the later cash is paid, but not too late, the better. Companies employ remote disbursement banks to facilitate holding at

    		•
  • Q : State Section 1.80 Section 1.80 : The

    Section 1.80: The section of Budget Act which comprises the periods of accessibility for Budget Act appropriations.

    		•
  • Q : Assignments i want to write final state

    i want to write final state report. My state is Texas.

    		•
  • Q : What is Minor Capital Outlay Minor

    Minor Capital Outlay: The construction projects or tools needed to finish a construction project, estimated to cost less than $600,000 bonus any escalation per Public Contract Code 10108.

    		•
  • Q : Negative consequences of company

    Explain negative consequences of a company holding too much cash? A company holding too much cash would be giving up the chance to invest more in income generating assets

    		•
  • Q : Advantages and disadvantages of working

    Describe the advantages and disadvantages of the aggressive working capital financing approach? An aggressive working capital financing approach generally results in a lower cost of funds for a firm however a higher level of risk.

    		•