Probability statistics, statistics, Basic Statistics

Probability

3DP, a Luxembourg-based company plans to develop and sell highly specialized 3D printers. The cost of product development is estimated at EUR 50,000.-, irrespective of whether or not the product is finally marketed. The company owners put the odds of a successful product launch at 70%.

The market for such a sophisticated piece of equipment is rather limited: the number of orders is assumed to follow a binominal distribution. In the first quarter will definitely not exceed 20, and the probability of placing a single order is evaluated at 30%. The variable cost would amount to EUR 3,300.- and the final price tag would be set at EUR 15,500.-

As the company owners have secured the patent for their innovative technology, a viable alternative to launching the production is simply to sell the license. USAin3D, a U.S.-based company is a potential buyer offering USD 7,800.- (non-negotiable) and 3DP owners must take the final decision before three months.

By that time, of course, the EUR/USD exchange rate will surely change. A friend of 3DP owners, who happens to be a financial analyst, estimates that in three months' time the EUR/USD exchange rate will fall by not more than -10.504% with the probability of 2.5%. To make this estimate, he assumed that the percentage change of the EUR/USD exchange rate follows a normal distribution with (three-month) volatility of 5.9535%. The current (spot) EUR/USD exchange rate is equal 1.3684 (dollars per one euro).

Questions:

1. Estimate the Expected Monetary Value (EMV) of the two options: product launch and selling the license. What should be the decision by the 3DP owners based solely on financial considerations? Is it a strong decision from the business point of view?

2. How would the EUR/USD exchange rate need to change in order for the 3DP owners to change their mind? What is the probability associated with such a fx movement?

Calculate the answers and present them in a short powerpoint presentation

 

 

Posted Date: 2/10/2012 2:36:09 PM | Location : United States







Related Discussions:- Probability statistics, statistics, Assignment Help, Ask Question on Probability statistics, statistics, Get Answer, Expert's Help, Probability statistics, statistics Discussions

Write discussion on Probability statistics, statistics
Your posts are moderated
Related Questions
_______ 1. F''s share of income from various sources is as follows for the current year: Source F''s Share of Entity''s Net Income F''s Share of Distributions ABC Partnership after

Tim Snyder and Jay Wise have decided to form a partnership. They have agreed that Snyder is to invest 30000 and Wise is to invest 40000. Snyder is to devote full time to the busi

1. If each sample taken has 500 units, and the average proportion nonconforming is 0.034, what is the upper and lower control limits for the p-chart? 2. If you sample 450 parts

how are financial instruments recognised in financial reports in the past and present?

The trial balance of the Parton Wholesale Company contained the following accounts at December 31, 2010 the end of the company’s calendar year. PARTON WHOLESALE COMPANY Trial Bala

Quartile Deviation The range as a measure of dispersion discussed above has certain limitations. It is based on two extreme items and it fails to take account of the scatter withi



which method is better for new product to gather the information they need,primary data or secondary data?

Graphical representation of freehand and semi average method