# Question

A company is about to develop and then market a new product. It wants to build a simulation model for the entire process, and one key uncertain input is the development cost. For each of the following scenarios, choose an appropriate distribution together with its parameters, justify your choice in words, and use @RISK to draw your chosen distribution.

a. Company experts have no idea what the distribution of the development cost is. All they can state is “we are 95% sure it will be at least $450,000, and we are 95% sure it will be no more than $650,000.”

b. Company experts can still make the same statement as in part a, but now they can also state: “We believe the distribution is symmetric, reasonably bell-shaped, and its most likely value is about $550,000.”

c. Company experts can still make the same statement as in part a, but now they can also state: “We believe the distribution is skewed to the right, and its most likely value is about $500,000.”

a. Company experts have no idea what the distribution of the development cost is. All they can state is “we are 95% sure it will be at least $450,000, and we are 95% sure it will be no more than $650,000.”

b. Company experts can still make the same statement as in part a, but now they can also state: “We believe the distribution is symmetric, reasonably bell-shaped, and its most likely value is about $550,000.”

c. Company experts can still make the same statement as in part a, but now they can also state: “We believe the distribution is skewed to the right, and its most likely value is about $500,000.”

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