Suppose you want to build an @RISK model to help value a project that will require construction of plant to produce a new drug.Demand for the drug is uncertain, but based on historical information from similar products, it is estimated to be normally distributed ~ Normal (50,000, 12,000) units per year.A range of values for the plant capacity are under consideration, and your firm will ultimately choose the value that maximizes the NPV of the project.The NPV will be calculated using a 10% discount rate along with assumptions that a unit of production capacity costs $16 to build, the revenue per unit sold will be $3.70 and the variable cost per unit produced is $0.20.

a)What is/are the input variable(s) for your model?

b)What is the output variable for your model?

c)What is the decision variable (if any) for your model?

Answer rating: 100% (QA)

For the RISK model to value the new drug production project heres how the variables would be defined ... View the full answer