Question: need to solve using crystal ball spreadsheet model: simulate profit for the below: Catch'em Corporation is considering development and introduction of a new mousetrap into
need to solve using crystal ball spreadsheet model: simulate profit for the below:
Catch'em Corporation is considering development and introduction of a new mousetrap into the market and there is a significant technological uncertainty about the cost of product development and production, as well as market uncertainty about product's success and the competitors' actions. Specifically, the VP of R&D expects the product development cost to be $30,000, with standard deviation of $5,000. The VP of production estimates that the production cost could be as low as $6 per unit, or as high as $8 per unit. Once produced, if the mousetrap does not become popular, the total sales can be expected to be 60,000 units at a price of $10 per unit. On the other hand, if the mousetrap does catch attention, the sales could be as high as 100,000 units. However, in that case, new competition can be expected to move in and drive the price down to $8 a unit. From the preliminary research, the marketing VP believes that there is a 60% chance that the mousetrap will be a hit.
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