Probability statistics, statistics, Basic Statistics

Assignment Help:

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

 

 


Related Discussions:- Probability statistics, statistics

What is AXlOM in accounting?, AXIOM, usually, it is a saying that is common...

AXIOM, usually, it is a saying that is commonly recognized on its own merits; in sense, it is an idea that is not vulnerable of confirmation or disproof; its reality is believed to

Opertions research, meaning and definition of operations rsearch

meaning and definition of operations rsearch

Probability, A bag contain 5 white , 7 red and 8 black balls. If four balls...

A bag contain 5 white , 7 red and 8 black balls. If four balls are drawn one by one without replacement, find the probability of getting all white balls.

Time series analysis, what is the interpretation of plots in least square m...

what is the interpretation of plots in least square method

Illustrate linear correlation, Q. Illustrate Linear Correlation? Ans. ...

Q. Illustrate Linear Correlation? Ans. In bivariate studies we are often interested in finding out whether there is a relationship between two sets of data. Are SAT score

Convexity and concavity, Show that for a single-output technology, Y is con...

Show that for a single-output technology, Y is convex if and only if the production function f (z) is concave.

Derive an expression for the autocorrelation, i)A sionusodial signal has t...

i)A sionusodial signal has the form x(t) = Asin?t Derive an expression for the autocorrelation Rxx(λ) II) Explain the significance of this result in term of the frequen

Cost accounting, wat is cost accounting and wats its scope ?

wat is cost accounting and wats its scope ?

Quantitative techniques, How can we apply matrix algebra in various decisio...

How can we apply matrix algebra in various decision models in business and management?

Simple random sampling, This type of sampling is also known as chance sampl...

This type of sampling is also known as chance sampling or probability where each and every item in the population has an equal change of inclusion in the sample and one of the poss

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd