Price Simulation - Assignment Example

Risk analysis Report Student Name: Subject: Quantitative methods Lecturer: 1. a Price simulation The simulation results for this situation gave the results as shown below During the calculation of the cumulative profit, it was first noted that for the 5 years the competitors could either enter market or not. If they entered, their effect impacted the profit to fluctuate between within the region indicated below. The excel random function was used to establish the fluctuating number of competitors who could enter at any time. The number of competitors command the market share of AST and this was matched with the random number and then weighted over the 5 years. The growth of customers impacted on the expected market share with a normal distribution With this in mind a Risk analysis was carried out using the following steps. First , having identified the formular to determine the market share, a table for risk analysis was drawn as shown below The profit cell was then clicked and added to the output of the @Risk tab. The simulation settings were then set to 1000 iterations for 1 simulation The tab for settings also allowed to set for monte carlo simulation/random values as shown below The Sampling tab was then used 1. b. Simulation Histogram The simulation was then run and gave the Histogram as shown below. Figure 1: A graph showing a monte carlo simulation for estimation of possible profits depending on the entry of competitors. Discussion Measures of central Tendency Mean= 45, 299,893 Median= 42,919,740 From the @Risk simulated model, there is a dominant mode of class of about 55,000,000 Measures of variability Max 102, 373,740 Min: 13, 675,500 Range: 102,373,740-13,675,500= 88698240 Stdev: 18140 155 The results show that profit is expected throughout with more reasonable profits over 90% being recorded. However, from the measures of dispersion this data is widely spread. 2. Qn two. Decision analysis 2.a The table showing the input values Table 1: A table of input values for the decision making process event probability Decision Payoff not market Read More