Question: Using the generic profit model developed in the section Logic and Business Principles in Chapter 9, develop a financial simulation model for a new product

Using the generic profit model developed in the section Logic and Business Principles in Chapter 9, develop a financial simulation model for a new product proposal and construct a distribution of profits under the following assumptions: Price is fixed at $1,000. Unit costs are unknown and follow the distribution.

Unit Cost Probability

Probability

$400

0.20

$600

0.40

$700

0.25

$800

0.15

Demand is also variable and follows the following distribution

Demand

Probability

120

0.25

140

0.50

160

0.25

Fixed costs are estimated to follow the following distribution:

Fixed Costs

Probability

$45,000

0.25

$50,000

0.50

$55,000

0.30

Implement your model using Crystal Ball to determine the best production quantity to maximize the average profit. Would you conclude that this product is a good investment? 

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