Question: Happy Electronics is developing a new product with a unit profit margin (i.e., the difference between the unit selling price and unit cost) of $5.
Happy Electronics is developing a new product with a unit profit margin (i.e., the difference between the unit selling price and unit cost) of $5. The development time is a random variable that follows an exponential distribution with a parameter = , where is the total investment in this R&D project in million $. For example, if the total investment is $5 million, then = 5. The demand for the product, D, will be a function of the development time: the later the product is introduced, the smaller the demand. In particular, the demand = 10,000,000 1 + . The company is now comparing two investment plans: $2 million versus $5 million. To maximize the total profit, which plan is better? Solve this problem by building a simulation model in Excel and repeating the simulation 1,000 times
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