Use your for model from Problem 3 4 to construct a
Use your for model from Problem 3-4 to construct a simulation model for the TitMar PTV. Incorporate two random (i. e., stochastic) variables in your model to capture the size of the market for scooters. Each of these variables is modeled differently, as follows:
MARKET SHARE Market share follows a triangular distribution with a most likely value of 15%, a minimum of 10%, and a maximum of 20%.
GROWTH RATE IN MARKET SIZE The growth rate in market size for year 1 is assumed to be normally distributed with a mean of 5% and standard deviation of 2%. For year 2, the expected market-size growth rate is equal to the simulated growth rate for year 1 and has a standard deviation of 2%. The growth rates for years 3 and beyond follow the pattern described for year 2. Run 10,000 random trials and define two output variables— NPV and IRR. What is the probability that the NPV will be zero or lower? What is the probability of an IRR less than 18%?
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