New Semester
Started
Get
50% OFF
Study Help!
--h --m --s
Claim Now
Question Answers
Textbooks
Find textbooks, questions and answers
Oops, something went wrong!
Change your search query and then try again
S
Books
FREE
Study Help
Expert Questions
Accounting
General Management
Mathematics
Finance
Organizational Behaviour
Law
Physics
Operating System
Management Leadership
Sociology
Programming
Marketing
Database
Computer Network
Economics
Textbooks Solutions
Accounting
Managerial Accounting
Management Leadership
Cost Accounting
Statistics
Business Law
Corporate Finance
Finance
Economics
Auditing
Tutors
Online Tutors
Find a Tutor
Hire a Tutor
Become a Tutor
AI Tutor
AI Study Planner
NEW
Sell Books
Search
Search
Sign In
Register
study help
business
practical management science
Practical Management Science, Revised 3rd Edition Wayne L Winston, S. Christian Albright - Solutions
Modify Example 12.9 so that the portfolio now contains 100 shares of stock and one put option on the stock with the same parameters as in the example.You can assume that the price of an option is $81.Discuss in a brief memo how this portfolio differs from the portfolio in the
A European put option allows an investor to sell a share of stock at the exercise price on the exercise data.For example, if the exercise price is $48, and the stock price is $45 on the exercise date, the investor can sell the stock for $48 and then immediately buy it back(that is, cover his
Referring to the retirement example in Example 12.7, rerun the model for a planning horizon of 10 years;15 years; 25 years. For each, try to find the set of investment weights that maximize the VAR (the 5th percentile) of final cash in today’s dollars. Does it appear that a portfolio heavy in
Modify the model from Example 12.7 so that you use only the years 1970 to 2001 of historical data. Run the simulation for the same three sets of investment weights. Comment on whether your results differ in any important way from those in the example.
The simulation output from Example 12.7 indicates that an investment heavy in stocks produces the best results. Would it be better to invest entirely in stocks?Find out by rerunning the simulation. Is there any apparent downside to this strategy?
Then comment on the differences, if any, between your simulation results and those in the example.
Run the retirement model from Example 12.7 with a damping factor of 1.0 (instead of 0.98), again using the same three sets of investment weights. Explain in words what it means, in terms of the simulation, to have a damping factor of
In the cash balance model from Example 12.6, is the$250,000 minimum cash balance requirement really“costing” the company very much? Find out by rerunning the simulation with minimum required cash balances of $50,000, $100,000, $150,000, and $200,000.Use the RISKSIMTABLE function to run all
In the cash balance model from Example 12.6, the timing is such that some receipts are delayed by 1 or 2 months, and the payments for materials and labor must be made a month in advance. Change the model so that all receipts are received immediately, and payments made this month for materials and
Rerun the new car simulation from Example 12.5, but now use the RISKSIMTABLE function appropriately to simulate discount rates of 7.5%, 10%, 12.5%, and 15%. Comment on how the outputs change as the discount rate decreases from the value we used, 15%.
Rerun the new car simulation from Example 12.5 but now introduce uncertainty into the fixed development cost. Let it be triangularly distributed with parameters$1.2 billion, $1.3 billion, and $1.7 billion. (You can check that the mean of this distribution is $1.4 billion, the same as the cost given
In the simulation of Deming’s funnel experiment, the@RISK outputs show how tampering leads to poor results, at least in terms of the mean and standard deviation of the distance of the final drop from the target.However, the results we presented don’t show how the tampering rules, particularly
In the drug production example, Example 12.3, suppose we want to run 5 simulations, where we vary the probability of passing inspection from 0.6 to 1.0 in increments of 0.1. Use the RISKSIMTABLE function appropriately to do this. Comment on the effect of this parameter on the key outputs. In
Do you always get this answer? Find out by (1) running the simulation 10 more times, each with 1000 iterations, and finding the 95th percentile and corresponding date in each, and(2) running the simulation again, but with 10,000 iterations. Comment on the difference between simulations 1 and 2 in
In the drug production example, Example 12.3, we commented on the 95th percentile on days required in cell I35 and the corresponding date in cell J35. If the company begins production on this date, then it is 95%sure to complete the order by the due date. We found this date to be August
See how sensitive the results in the warranty example, Example 12.2, are to the following changes. For each part, make the change indicated, run the simulation, and comment on any differences between your outputs and the outputs in the example.a. The cost of a new camera is increased to $300.b. The
In the warranty example, Example 12.2, we introduced the gamma distribution to model the right skewness of the lifetime distribution. Experiment to see how the results change if you use the triangular distribution instead. Let its minimum value be 0, and choose its most likely and maximum values so
Referring to Example 12.1, if the average bid for each competitor who bids stays the same, but their bids exhibit less variability, does Miller’s optimal bid increase or decrease? To study this question, assume that each competitor’s bid, expressed as a multiple of Miller’s cost to complete
If the number of competitors in Example 12.1 doubles, how does the optimal bid change?
In Example 12.1, the possible profits vary from negative to positive for each of the 10 possible bids examined.a. For each of these, use @RISK’s RISKTARGET function to find the probability that Miller’s profit is positive. Do you believe these results should have any bearing on Miller’s
We are constantly hearing reports on the nightly news about natural disasters—droughts in Texas, hurricanes in Florida, floods in California, and so on. We often hear that one of these was the “worst in over 30 years,” or some such statement. This was especially the case in the last half of
A building contains 1000 light bulbs. Each bulb lasts at most 5 months. The company maintaining the building is trying to decide whether it is worthwhile to practice a “group replacement” policy. Under a group replacement policy, all bulbs are replaced every T months (where T is to be
Many people who are involved in a small auto accident do not file a claim because they are afraid their insurance premiums will be raised. Suppose that City Farm Insurance has three rates. If you file a claim, you are moved to the next higher rate. How might you use simulation to determine whether
Big Hit Video must determine how many copies of a new video to purchase. Assume that the company’s goal is to purchase a number of copies that will maximize its expected profit from the video during the next year. Describe how you would use simulation to solve this problem. To simplify matters,
In statistics, we often use observed data to test a hypothesis about a population or populations. The basic method uses the observed data to calculate a test statistic (a single number). If the magnitude of this test statistic is sufficiently large, we reject the null hypothesis in favor of the
Note that each of these distributions is very nonnormal. Run each simulation with 10 values in each average, and run 1000 iterations to simulate 1000 averages. Create a histogram of the averages to see that it is indeed bell-shaped.Then repeat, using 30 values in each average. Are the histograms
Simulation can be used to illustrate a number of results from statistics that are difficult to understand with nonsimulation arguments. One is the famous central limit theorem, which says that if you sample enough values from any population distribution and then average these values, the resulting
At the beginning of each week, a machine is in one of four conditions: 1 excellent; 2 good; 3 average; 4 bad. The weekly revenue earned by a machine in state 1, 2, 3, or 4 is $100, $90, $50, or $10, respectively. After observing the condition of the machine at the beginning of the week, the
ATax Saver Benefit (TSB) plan allows you to put money into an account at the beginning of the calendar year that can be used for medical expenses. This amount is not subject to federal tax—hence the “Tax Saver.” As you pay medical expenses during the year, the administrator of the TSB
United Electric (UE) sells refrigerators for $400 with a 1-year warranty. The warranty works as follows. If any part of the refrigerator fails during the first year after purchase, UE replaces the refrigerator for an average cost of $100. As soon as a replacement is made, another 1-year warranty
If the set of numbers is 4, 3, 2, 4, the RANK function will return 1, 3, 4, 1.c. After using the RANK function, you should be able to determine whether at least two of the 30 people have the same birthday How?
It is surprising (but true) that if 23 people are in the same room, there is about a 50% chance that at least two people will have the same birthday. Suppose you want to estimate the probability that if 30 people are in the same room, at least two of them will have the same birthday. You can
The file has the formulas you might expect for this situation entered in the range C20:G23. You can check how the RISKCORRMAT function has been used in these formulas. Just so that we have an@RISK output cell, we calculate the average of all returns in cell B25 and designate it as an @RISK
The annual return on each of four stocks for each of the next five years is assumed to follow a normal distribution, with the mean and standard deviation for each stock, as well as the correlations between stocks, listed in the file P11_38.xlsx. We believe that the stock returns for these stocks in
If Target orders 200 jerseys, its cost is $27.00 per jersey. Every increment of 50 jerseys reduces the unit cost of a jersey by $1.35. For example, if the order quantity is from 250 jerseys to 299 jerseys, the unit cost for each is $25.65. After the Super Bowl, the jerseys will be marked down to a
Target is trying to decide how many Peyton Manning jerseys to order for the upcoming football season.The jerseys sell for $50, and Target believes that the demand at this price is normally distributed with a most likely value of 200 and a 95% chance of being between 120 and
For example, if full-price demand is 2500, then at a 10% discount, customers would be willing to buy 1000 T-shirts. The unit cost of purchasing T-shirts depends on the number of T-shirts ordered, as shown in the file P11_36.xlsx. Use simulation to see how many T-shirts Dilbert’s should order.
Demand at various discounts is assumed to be a multiple of full price demand.These multiples, for discounts of 10%, 20%, 40%, 50%, and 60% are, respectively, 0.4, 0.7, 1.1, 2, and
Dilbert’s Department Store is trying to determine how many Hanson T-shirts to order. Currently the shirts are sold for $21.00, but at later dates the shirts will be offered at a 10% discount, then a 20% discount, then a 40% discount, then a 50% discount, and finally a 60%discount. Demand at the
The contract between Jean Hudson and Lemington’s works as follows. At the beginning of the season, Lemington’s reserves x units of capacity. Lemington’s must take delivery for at least 0.8x dresses and can, if desired, take delivery on up to x dresses. Each dress sells for $160, and Jean
Lemington’s is trying to determine how many Jean Hudson dresses to order for the spring season. Demand for the dresses is assumed to follow a normal distribution with mean 400 and standard deviation
The average test score of those selected is the average of the scores that are at least 0.842. To determine this, use Excel’s DAVERAGE function. To do so, put the heading Score in cell A3, generate the 1000 test scores in the range A4:A1003, and name the range A3:A1003 Data. In cells C3 and C4,
Assume that all of your job applicants must take a test, and that the scores on this test are normally distributed.The “selection ratio” is the cutoff point you use in your hiring process. For example, a selection ratio of 20%means that you will accept applicants for jobs who rank in the top
W. L. Brown, a direct marketer of women’s clothing, must determine how many telephone operators to schedule during each part of the day. W. L. Brown estimates that the number of phone calls received each hour of a typical 8-hour shift can be described by the probability distribution in the file
It is equally likely that annual unit sales for Widgetco’s widgets will be low or high. If sales are low (60,000), the company can sell the product for $10 per unit. If sales are high (100,000), a competitor will enter, and Widgetco can sell the product for only $8 per unit. The variable cost per
A new edition of our management science textbook will be published a year from now. Our publisher currently has 2000 copies on hand and is deciding whether to do another printing before the new edition comes out. The publisher estimates that demand for the book during the next year is governed by
If the prize is really behind door 3, Monty must open door 1.
If the prize is really behind door 1, Monty must open door
If the prize is really behind door 2, Monty is equally likely to open door 1 or door
You now have the opportunity to switch and choose door 1.Should you switch? Use a spreadsheet to simulate this situation 1000 times. For each replication, use an@RISK function to generate the door behind which the prize sits. Then use another @RISK function to generate the door that Monty will
Before you see whether the prize is behind door 2, host Monty Hall opens a door that has no prize behind it. To be specific, suppose that before door 2 is opened, Monty reveals that there is no prize behind door
It is equally likely that the prize is behind any of the three doors. The two doors without a prize have nothing behind them. You randomly choose door
You have made it to the final round of “Let’s Make a Deal.” You know that there is $1 million prize behind one of the three doors: door 1, door 2, or door
Six months before its annual convention, the American Medical Association (AMA) must determine how many rooms to reserve. At this time, the AMA can reserve rooms at a cost of $100 per room. The AMA believes the number of doctors attending the convention will be normally distributed with a mean of
The Business School at State University currently has three parking lots, each containing 155 spaces. Two hundred faculty members have been assigned to each lot. On a peak day, an average of 70% of all lot 1 parking sticker holders show up, an average of 72% of all lot 2 parking sticker holders
The effect of the shapes of input distributions on the distribution of an output can depend on the output function. For this problem, assume there are 10 input variables. We want to compare the case where these 10 inputs each has a normal distribution with mean 1000 and standard deviation 250 to
Suppose you are going to invest equal amounts in three stocks. The annual return from each stock is normally distributed with mean 0.01 (1%) and standard deviation 0.06. The annual return on your portfolio, the output variable of interest, is the average of the three stock returns. Run @RISK, using
This time, verify not only that the correlation between the two inputs is approximately 0.7, but also that the shapes of the two input distributions are approximately what they should be: normal for the first and triangular for the second. Do this by creating histograms in Excel. The point is that
Repeat Problem 23, but now make the second input variable triangularly distributed with parameters 50, 100, and
Repeat the previous problem, but make the correlation between the two inputs equal to 0.7. Explain how the results change.
When you use @RISK’s correlation feature to generate correlated random numbers, how can you verify that they are correlated? Try the following. Use the RISKCORRMAT function to generate two normally distributed random numbers, each with mean 100 and standard deviation 10, and with correlation
Bottleco produces six-packs of soda cans. Each can is supposed to contain at least 12 ounces of soda. If the total weight in a six-pack is under 72 ounces, Bottleco is fined $100 and receives no sales revenue for the sixpack.Each six-pack sells for $3.00. It costs Bottleco$0.02 per ounce of soda
Although the normal distribution is a reasonable input distribution in many situations, it does have two potential drawbacks: (1) it allows negative values, even though they may be extremely improbable, and(2) it is a symmetric distribution. Many situations are modeled better with a distribution
Do this for the discrete distributions given in the problem and then do it for normal distributions.For the normal case, assume that the regular demand is normally distributed with mean 9800 and standard deviation 1300 and that the demand at the reduced price is normally distributed with mean 3800
Use @RISK to analyze the sweatshirt situation in Problem
Use @RISK to determine the best order quantity, that is, the one with the largest mean profit.Using the statistics and/or graphs from @RISK, discuss whether this order quantity would be considered best by the car dealer. (The point is that a decision maker can use more than just mean profit in
In Problem 12, suppose that the demand for cars is normally distributed with mean 100 and standard deviation
Continuing the previous problem, assume as in Problem 11 that the damage amount is normally distributed with mean $3000 and standard deviation $750. Run @RISK with 5000 iterations to simulate the amount you pay for damage. Compare your results with those in the previous problem. Does it appear to
In Problem 11, suppose that the damage amount is triangularly distributed with parameters 500, 1500, and 7000. That is, the damage in an accident can be as low as $500 or as high as $7000, the most likely value is$1500, and there is definite skewness to the right. (It turns out, as you can verify
Your single output variable should be the sum of these three numbers.Verify with @RISK that the distribution of this output is approximately normal with mean 300 and variance 300 (hence, standard deviation 300 17.32).
If you add several normally distributed random numbers, the result is normally distributed, where the mean of the sum is the sum of the individual means, and the variance of the sum is the sum of the individual variances.(Remember that variance is the square of standard deviation.) This is a
But then an order of 200 calendars must also yield a larger expected profit than an order of 190 calendars.Why?)
In the Walton Bookstore example with a discrete demand distribution, explain why an order quantity other than one of the possible demands cannot maximize the expected profit. (Hint: Consider an order of 190 calendars.If this maximizes expected profit, then it must yield a higher expected profit
A sweatshirt supplier is trying to decide how many sweatshirts to print for the upcoming NCAA basketball championships. The final four teams have emerged from the quarterfinal round, and there is now a week left until the semifinals, which are then followed in a couple of days by the finals. Each
In the Walton Bookstore example, suppose that Walton receives no money for the first 50 excess calendars returned but receives $2.50 for every calendar after the first 50 returned. Does this change the optimal order quantity?
In August 2007, a car dealer is trying to determine how many 2008 cars to order. Each car ordered in August 2007 costs $10,000. The demand for the dealer’s 2008 models has the probability distribution shown in the file P11_12.xlsx. Each car sells for$15,000. If demand for 2008 cars exceeds the
Suppose you own an expensive car and purchase auto insurance. This insurance has a $1000 deductible, so that if you have an accident and the damage is less than $1000, you pay for it out of your pocket. However, if the damage is greater than $1000, you pay the first $1000 and the insurance pays the
Continuing the preceding problem, suppose that another key uncertain input is the development time, which is measured in an integer number of months.For each of the following scenarios, choose an appropriate distribution, together with its parameters; justify your choice in words; and use @RISK to
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
We all hate to bring change to a store. By using random numbers, we could eliminate the need for change and give the store and the customer a fair deal. This problem indicates how it could be done.a. Suppose that you buy something for $0.20. How could you use random numbers (built into the cash
Then superimpose a normal distribution on this drawing, choosing the mean and standard deviation to match those from the triangular distribution. (Click on the Add Overlay button to get a choice of distributions to superimpose.)a. What are the 5th and 95th percentiles for these two distributions?b.
Use @RISK to draw a triangular distribution with parameters 200, 300, and
Check your answer by using the BINOMDIST function appropriately in Excel.
Use @RISK to draw a binomial distribution that results from 50 trials with probability of success 0.3 on each trial, and use it to answer the following questions.a. What are the mean and standard deviation of this distribution?b. You have to be more careful in interpreting@RISK probabilities with a
Then answer the following questions.a. What are the mean and standard deviation of this distribution?b. What are the 5th and 95th percentiles of this distribution?c. What is the probability that a random number from this distribution is less than 450?d. What is the probability that a random number
Use @RISK to draw a triangular distribution with parameters 300, 500, and
Then answer the following questions.a. What is the probability that a random number from this distribution is less than 450?b. What is the probability that a random number from this distribution is greater than 650?c. What is the probability that a random number from this distribution is between
Use @RISK to draw a normal distribution with mean 500 and standard deviation
Then answer the following questions.a. What are the mean and standard deviation of this distribution?b. What are the 5th and 95th percentiles of this distribution?c. What is the probability that a random number from this distribution is less than 450?d. What is the probability that a random number
Use @RISK to draw a uniform distribution from 400 to
Are the answers close to what they should be (as you learned in your statistics course)?c. Create a histogram of the random numbers using 10 to 15 categories of your choice. Does this histogram have approximately the shape you would expect? (See the Appendix to this chapter for instructions on
Then freeze these random numbers.a. Calculate the mean and standard deviation of these random numbers. Are they approximately what you would expect?b. Of these random numbers, what fraction is with k standard deviations of the mean? Answer for k 1; for k 2; for k
Use Excel’s functions (not @RISK) to generate 1000 random numbers from a normal distribution with mean 100 and standard deviation
Use the RAND function and the Copy command to generate a set of 100 random numbers.a. What fraction of the random numbers are smaller than 0.5?b. What fraction of the time is a random number less than 0.5 followed by a random number greater than 0.5?c. What fraction of the random numbers are larger
Based on Balson et al. (1992). An electric utility company is trying to decide whether to replace its PCB transformer in a generating station with a new and safer transformer. To evaluate this decision, the utility needs information about the likelihood of an incident, such as a fire; the cost of
The Ventron Engineering Company has just been awarded a $2 million development contract by the U.S. Army Aviation Systems Command to develop a blade spar for its Heavy Lift Helicopter program. The blade spar is a metal tube that runs the length of and provides strength to the helicopter blade. Due
The contract allows him to buy 100 shares of ABC stock at the end of March, April, or May at a guaranteed price of $50 per share. He can exercise this option at most once. For example, if he purchases the stock at the end of March, he can’t purchase more in April or May at the guaranteed price.
Suppose an investor has the opportunity to buy the following contract, a stock call option, on March
Sarah Chang is the owner of a small electronics company.In 6 months, a proposal is due for an electronic timing system for the next Olympic Games. For several years, Chang’s company has been developing a new microprocessor, a critical component in a timing system that would be superior to any
Many men over 50 take the PSA blood test. The purpose of the PSA test is to detect prostate cancer early.Dr. Rene Labrie of Quebec conducted a study to determine whether the PSA test can actually prevent cancer deaths. In 1989, Dr. Labrie randomly divided all male registered voters between 45 and
Showing 1000 - 1100
of 2541
First
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Last
Step by Step Answers
Get 50% OFF
Claim Now
