QUESTION 17

1. Please answer questions 17 -19 according to the given data.

   Strassel Investors buys real estate, develops it, and resells it for a profit. A new property is available, and Bud Strassel, the president, and owner of Strassel Investors, believes if he purchases and develops this property, it can then be sold for $160,000. The current property owner has asked for bids and stated that the property will be sold for the highest bid in excess of $100,000. Two more companies will be submitting bids for the property. Strassel does not know what the competitors will bid, but he assumes for planning purposes that the amount bid by each competitor will be uniformly distributed between $100,000 and $150,000.

   HW 8 Strassel Investors - Simulation.xlsx

   Download the attached worksheet and develop a model that can be used to simulate the bids made by the two competitors. Strassel is considering a bid of $130,000 for the property. All the steps you need to follow are written in the excel file.

   Using a simulation of 1,000 trials, what is the estimate of the probability Strassel will be able to obtain the property using a bid of $130,000? (Round your answer to two decimals.) Remember, your answer, which is a probability must be between 0 and 1.

QUESTION 18

1. How much does Strassel need to bid to be assured of obtaining the property? (Assume that any probability above 0.99 is considered to be assured.) You can change the amount in cell E1 and observe how the probability of a win changes.

   	A.	$150,000
   	B.	$135,000
   	C.	$140,000
   	D.	$130,000

QUESTION 19

1. What is the expected profit for a bid of $140,000? To calculate this, change the value in E1 from 130000 to 140000 and check the mean profit. (Do not write the dollar sign in the answer box)