Probability of making loss from this investment

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Reference no: EM132261482

Your group is a decision-making team in your firm and is considering an estimated $10 million expansion project. Estimates of key input factors are as following (all uniformly distributed):

Market size: 100,000 to 350,000 tons

Selling price: $375 to $575

Market growth rate: 0 to 6% per year

Market share: 3% to 17%

Total investment required: $7 million to $10.5 million

Useful life of the new facility: 5 to 15 years

Residual value of the facility: $3.5 million to $5 million

Operating costs: $320 to $550 per ton

Fixed costs: $250,000 to $375,000 per year

Analyze the risks associated with this project. The results of the risk analysis include: estimated net profit/loss, possible minimum profit or maximum loss, possible maximum profit or minimum loss, and probability of making loss from this investment.

Use Excel to create a simulation model and solve this risk analysis problem.

Reference no: EM132261482

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