Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Chapter 11.3, Problem 18P
Summary Introduction
To modify: The model and run the simulation.
Introduction: Simulation model is the digital prototype of the physical model that helps to
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Chapter 11 Solutions
Practical Management Science
Ch. 11.2 - If the number of competitors in Example 11.1...Ch. 11.2 - In Example 11.1, the possible profits vary from...Ch. 11.2 - Referring to Example 11.1, if the average bid for...Ch. 11.2 - See how sensitive the results in Example 11.2 are...Ch. 11.2 - In Example 11.2, the gamma distribution was used...Ch. 11.2 - Prob. 6PCh. 11.2 - In Example 11.3, suppose you want to run five...Ch. 11.2 - In Example 11.3, if a batch fails to pass...Ch. 11.3 - Rerun the new car simulation from Example 11.4,...Ch. 11.3 - Rerun the new car simulation from Example 11.4,...
Ch. 11.3 - In the cash balance model from Example 11.5, the...Ch. 11.3 - Prob. 12PCh. 11.3 - Prob. 13PCh. 11.3 - The simulation output from Example 11.6 indicates...Ch. 11.3 - Prob. 15PCh. 11.3 - Referring to the retirement example in Example...Ch. 11.3 - A European put option allows an investor to sell a...Ch. 11.3 - Prob. 18PCh. 11.3 - Prob. 19PCh. 11.3 - Based on Kelly (1956). You currently have 100....Ch. 11.3 - Amanda has 30 years to save for her retirement. At...Ch. 11.3 - In the financial world, there are many types of...Ch. 11.3 - Suppose you currently have a portfolio of three...Ch. 11.3 - If you own a stock, buying a put option on the...Ch. 11.3 - Prob. 25PCh. 11.3 - Prob. 26PCh. 11.3 - Prob. 27PCh. 11.3 - Prob. 28PCh. 11.4 - Prob. 29PCh. 11.4 - Seas Beginning sells clothing by mail order. An...Ch. 11.4 - Based on Babich (1992). Suppose that each week...Ch. 11.4 - The customer loyalty model in Example 11.9 assumes...Ch. 11.4 - Prob. 33PCh. 11.4 - Suppose that GLC earns a 2000 profit each time a...Ch. 11.4 - Prob. 35PCh. 11.5 - A martingale betting strategy works as follows....Ch. 11.5 - The game of Chuck-a-Luck is played as follows: You...Ch. 11.5 - You have 5 and your opponent has 10. You flip a...Ch. 11.5 - Assume a very good NBA team has a 70% chance of...Ch. 11.5 - Consider the following card game. The player and...Ch. 11.5 - Prob. 42PCh. 11 - You now have 5000. You will toss a fair coin four...Ch. 11 - You now have 10,000, all of which is invested in a...Ch. 11 - Suppose you have invested 25% of your portfolio in...Ch. 11 - Prob. 47PCh. 11 - Based on Marcus (1990). The Balboa mutual fund has...Ch. 11 - Prob. 50PCh. 11 - Prob. 52PCh. 11 - The annual demand for Prizdol, a prescription drug...Ch. 11 - Prob. 54PCh. 11 - The DC Cisco office is trying to predict the...Ch. 11 - A common decision is whether a company should buy...Ch. 11 - Suppose you begin year 1 with 5000. At the...Ch. 11 - You are considering a 10-year investment project....Ch. 11 - Play Things is developing a new Lady Gaga doll....Ch. 11 - An automobile manufacturer is considering whether...Ch. 11 - It costs a pharmaceutical company 75,000 to...Ch. 11 - Prob. 65PCh. 11 - Rework the previous problem for a case in which...Ch. 11 - Prob. 68PCh. 11 - The Tinkan Company produces one-pound cans for the...Ch. 11 - Prob. 70PCh. 11 - In this version of dice blackjack, you toss a...Ch. 11 - Prob. 76PCh. 11 - It is January 1 of year 0, and Merck is trying to...Ch. 11 - Suppose you are an HR (human resources) manager at...Ch. 11 - You are an avid basketball fan, and you would like...Ch. 11 - Suppose you are a financial analyst and your...Ch. 11 - Software development is an inherently risky and...Ch. 11 - Health care is continually in the news. Can (or...
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- Referring to the retirement example in Example 11.6, rerun the model for a planning horizon of 10 years; 15 years; 25 years. For each, which set of investment weights maximizes the VAR 5% (the 5th percentile) of final cash in todays dollars? Does it appear that a portfolio heavy in stocks is better for long horizons but not for shorter horizons?arrow_forwardIn 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.arrow_forwardSuppose 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?arrow_forward
- This section contains questions regarding the 2nd part of the Unit 1 with the following topics: 1. Financial Planning2. Savings and budgeting3. Investing 1.Mutual Fund is when an investor directly acquires a claim on a security or property True False 2. The "Rule of 75" is used to determine the number of yearss needed to double the value of your money * True Falsearrow_forwardChange the capital budgeting model in Figure 6.5 so that 80% of each cost in row 5 is incurred right now, at the beginning of year 1, and the other 20% is incurred a year from now, at the beginning of year 2. You can assume that the NPVs don’t change. The available budget in year 1 is $11.5 million, and the budget in year 2 is $3.5 million.a. Assuming that available money uninvested in year 1 cannot be used in year 2, what combination of investments maximizes NPV?b. Suppose that any uninvested money in year 1 is available for investment in year 2. Does your answer to part a change?arrow_forwardA market analyst working for a small appliance manufacturer finds that if the firm produces and sells x blenders annually, a model for the total profit (in dollars) is P(x) = 8x + 0.3x2 − 0.001x3 − 372. Graph the function P in an appropriate viewing rectangle, and use the graph to answer the following questions. (a) When just a few blenders are manufactured, the firm loses money (profit is negative). (For example, P(10) = −263, so the firm loses $263.00 if it produces and sells only 10 blenders.) How many blenders must the firm produce to break even? (Round your answer to the nearest whole number.) blenders(b) Does profit increase indefinitely as more blenders are produced and sold? YesNo If not, what is the largest possible profit the firm could have? (If profit increases indefinitely, enter your answer as ∞. Otherwise, round your answer to the nearest cent.)arrow_forward
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- 1. Suppose you are going on a weekend trip to a city that is d miles away. Develop a model that determines your round-trip gasoline costs. What assumptions or approximations are necessary to treat this model as a deterministic model? Are these assumptions or approximations acceptable to you? 2. Suppose that a manager has a choice between the following two mathematical models of a given situation: (a)a relatively simple model that is a reasonable approximation of the real situation, and (b)a thorough and complex model that is the most accurate mathematical representation of the real situation possible. Why might the model described in part (a) be preferred by the manager?arrow_forwardSuppose an investor has the opportunity to buy the followingcontract, a stock call option, on March 1. Thecontract allows him to buy 100 shares of ABC stock atthe end of March, April, or May at a guaranteed priceof $50 per share. He can exercise this option at mostonce. For example, if he purchases the stock at the endof March, he can’t purchase more in April or May atthe guaranteed price. The current price of the stock is$50. Each month, assume that the stock price eithergoes up by a dollar (with probability 0.55) or goesdown by a dollar (with probability 0.45). If the investorbuys the contract, he is hoping that the stock price willgo up. The reasoning is that if he buys the contract, theprice goes up to $51, and he buys the stock (that is, heexercises his option) for $50, he can then sell the stockfor $51 and make a profit of $1 per share. On the otherhand, if the stock price goes down, he doesn’t haveto exercise his option; he can just throw the contractaway.a. Use a decision tree…arrow_forwardThe current solution to SureStep’s no-backloggingaggregate planning model requires a lot of firing. Runa one-way SolverTable with the firing cost as the inputvariable and the numbers fired as the outputs. Let thefiring cost increase from its current value to double that value in increments of $400. Do high firing costs even-tually induce the company to fire fewer workers?arrow_forward
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