Reference no: EM133121528

Tracy McCoy is shopping for a new car. She has identified a particular sports utility vehicle she likes but has heard that it has high maintenance costs. Tracy has decided to develop a simulation model to help her estimate maintenance costs for the life of the car. Tracy estimates that the projected life of the car with the first owner (before it is sold) is uniformly distributed with a minimum of 2.0 years and a maximum of 8.0 years. Furthermore, she believes that the miles she will drive the car each year can be defined by a triangular distribution with a minimum value of 3,700 miles, a maximum value of 14,500 miles, and a most likely value of 9,000 miles. She has determined from Automobile Association data that the maintenance cost per mile driven for the vehicle she is interested in is normally distributed, with a mean of $0.08 per mile and a standard deviation of $0.02 per mile. Using Monte Carlo Simulation, develop a simulation model (using 1,000 trials) and determine the average maintenance cost for the life of the car with Tracy and the probability that the cost will be less than $3,000.