you are thinking of opening a small copy shop. It costs $5000 to rent a copier for a year, and it cost $0.03 per copy to operate the copier. Other fixed costs of running the store withh amount to $400 per month. You plan to charge $0.10 per copy, and the store will be open 365 days per year. Each copier can make up to 100,000 copies per year. a. for one to five copiers rented and daily demands of 500, 1000, 1500, 2000 copies perday, find annual profit. That is, find annual profit for each of these combinations of copiers rented and daily demand. b. if you rent three copies, what daily demand for copies will allow you to break even? c. Graph profit as a function of the number of copiers for a daily demand of 500 copiers; for a daily demand of 2000 copies. Interpret your graph

you are thinking of opening a small copy shop. It costs $5000 to rent a copier for a year, and it cost $0.03 per copy to operate the copier. Other fixed costs of running the store withh amount to $400 per month. You plan to charge $0.10 per copy, and the store will be open 365 days per year. Each copier can make up to 100,000 copies per year. a. for one to five copiers rented and daily demands of 500, 1000, 1500, 2000 copies perday, find annual profit. That is, find annual profit for each of these combinations of copiers rented and daily demand. b. if you rent three copies, what daily demand for copies will allow you to break even? c. Graph profit as a function of the number of copiers for a daily demand of 500 copiers; for a daily demand of 2000 copies. Interpret your graph

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 40P

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If a monopolist produces q units, she can charge 400 4q dollars per unit. The variable cost is 60 per unit. a. How can the monopolist maximize her profit? b. If the monopolist must pay a sales tax of 5% of the selling price per unit, will she increase or decrease production (relative to the situation with no sales tax)? c. Continuing part b, use SolverTable to see how a change in the sales tax affects the optimal solution. Let the sales tax vary from 0% to 8% in increments of 0.5%.
Suppose you begin year 1 with 5000. At the beginning of each year, you put half of your money under a mattress and invest the other half in Whitewater stock. During each year, there is a 40% chance that the Whitewater stock will double, and there is a 60% chance that you will lose half of your investment. To illustrate, if the stock doubles during the first year, you will have 3750 under the mattress and 3750 invested in Whitewater during year 2. You want to estimate your annual return over a 30-year period. If you end with F dollars, your annual return is (F/5000)1/30 1. For example, if you end with 100,000, your annual return is 201/30 1 = 0.105, or 10.5%. Run 1000 replications of an appropriate simulation. Based on the results, you can be 95% certain that your annual return will be between which two values?
Suppose you currently have a portfolio of three stocks, A, B, and C. You own 500 shares of A, 300 of B, and 1000 of C. The current share prices are 42.76, 81.33, and, 58.22, respectively. You plan to hold this portfolio for at least a year. During the coming year, economists have predicted that the national economy will be awful, stable, or great with probabilities 0.2, 0.5, and 0.3. Given the state of the economy, the returns (one-year percentage changes) of the three stocks are independent and normally distributed. However, the means and standard deviations of these returns depend on the state of the economy, as indicated in the file P11_23.xlsx. a. Use @RISK to simulate the value of the portfolio and the portfolio return in the next year. How likely is it that you will have a negative return? How likely is it that you will have a return of at least 25%? b. Suppose you had a crystal ball where you could predict the state of the economy with certainty. The stock returns would still be uncertain, but you would know whether your means and standard deviations come from row 6, 7, or 8 of the P11_23.xlsx file. If you learn, with certainty, that the economy is going to be great in the next year, run the appropriate simulation to answer the same questions as in part a. Repeat this if you learn that the economy is going to be awful. How do these results compare with those in part a?
Based on Grossman and Hart (1983). A salesperson for Fuller Brush has three options: (1) quit, (2) put forth a low level of effort, or (3) put forth a high level of effort. Suppose for simplicity that each salesperson will sell 0, 5000, or 50,000 worth of brushes. The probability of each sales amount depends on the effort level as described in the file P07_71.xlsx. If a salesperson is paid w dollars, he or she regards this as a benefit of w1/2 units. In addition, low effort costs the salesperson 0 benefit units, whereas high effort costs 50 benefit units. If a salesperson were to quit Fuller and work elsewhere, he or she could earn a benefit of 20 units. Fuller wants all salespeople to put forth a high level of effort. The question is how to minimize the cost of encouraging them to do so. The company cannot observe the level of effort put forth by a salesperson, but it can observe the size of his or her sales. Thus, the wage paid to the salesperson is completely determined by the size of the sale. This means that Fuller must determine w0, the wage paid for sales of 0; w5000, the wage paid for sales of 5000; and w50,000, the wage paid for sales of 50,000. These wages must be set so that the salespeople value the expected benefit from high effort more than quitting and more than low effort. Determine how to minimize the expected cost of ensuring that all salespeople put forth high effort. (This problem is an example of agency theory.)
Rerun the new car simulation from Example 11.4, but now use the RISKSIMTABLE function appropriately to simulate discount rates of 5%, 7.5%, 10%, 12.5%, and 15%. Comment on how the outputs change as the discount rate decreases from the value used in the example, 10%.
In the cash balance model from Example 11.5, the timing is such that some receipts are delayed by one or two months, and the payments for materials and labor must be made a month in advance. Change the model so that all receipts are received immediately, and payments made this month for materials and labor are 80% of sales this month (not next month). The period of interest is again January through June. Rerun the simulation, and comment on any differences between your outputs and those from the example.
The IRR is the discount rate r that makes a project have an NPV of 0. You can find IRR in Excel with the built-in IRR function, using the syntax =IRR(range of cash flows). However, it can be tricky. In fact, if the IRR is not near 10%, this function might not find an answer, and you would get an error message. Then you must try the syntax =IRR(range of cash flows, guess), where guess" is your best guess for the IRR. It is best to try a range of guesses (say, 90% to 100%). Find the IRR of the project described in Problem 34. 34. Consider a project with the following cash flows: year 1, 400; year 2, 200; year 3, 600; year 4, 900; year 5, 1000; year 6, 250; year 7, 230. Assume a discount rate of 15% per year. a. Find the projects NPV if cash flows occur at the ends of the respective years. b. Find the projects NPV if cash flows occur at the beginnings of the respective years. c. Find the projects NPV if cash flows occur at the middles of the respective years.