Reference no: EM132066607

You can submit an excel file for this homework

Monte Carlo Simulation: Uber provides an app-based transportation service and it is one of the fastest growing companies with a strong investor backing. In this homework, you are going to be simulating a simplified version of Uber’s future cash flow in US for the coming 5 years, 2018 through 2022: Here is the information on the current numbers and future estimates for the US market: Annual revenue = 365*(Average Daily Rides * Average Price Per Ride) Average price per ride in 2017 = $4 Both variables (Average Daily Rides and Price Per Ride) are random variables for 2018 through 2022. You will need to come up with the probability distributions for each using the past data. Average Price Per Ride is expected to go up at the same rate as the inflation rate each year. Find a discrete probability distribution for inflation using the data provided here: https://www.usinflationcalculator.com/inflation/consumer-price-index-and-annual-percent-changes-from-1913-to-2008/ Use only the data provided in the last column from 1982 to 2017. Find the maximum and minimum inflation occurred during this period, divide the range into five equal sub-ranges and assign a probability to the mid-point of each range by using the frequency with which inflation occurred on this range in the past. Use this probability distribution for each of the years 2018 through 2022. Please assume that probability distribution is independent across years. Average Annual Rides Some of the major parameters Uber’s average annual ridership depends upon are GDP growth rate, unemployment rate, consumer confidence index, and the gas prices. You can think of other variables that would be instrumental in affecting UBER’s ridership. To keep things simple, I provided a highly stylized model where we assume the ridership depends only on GDP growth. Average Annual Rides = 900,000 + 8,000,000*annual GDP growth rate Again, find a discrete probability distribution for GDP growth rate using the data provided in an Excel file titled “World Bank GDP growth data” . (Use data from 1982 to 2016 for United States only) Employ the same approach as you did with the inflation probability distribution. Using the above information, answer the following: Due to its unconventional pricing (dynamic pricing, depending on supply and demand) and various claims on safety and regulation issues, company is expected to spend a considerable amount on legal settlements. Uber aims to be able to cover its settlement costs with the revenue it obtains from operations for the coming 5 years 90% of the time, on average. The settlement expense for 2018 through 2022 is expected to be a total of $X in today’s dollars. If the discount rate is 5%, estimate X by running a Monte Carlo Simulation 1,000 times.