Consider the PortaCom project discussed in Section 16.1.
a. An engineer on the product development team believes that first-year sales for the new printer will be 20,000 units. Using estimates of $45 per unit for the direct labor cost and $90 per unit for the parts cost, what is the first-year profit using the engineer’s sales estimate?
b. The financial analyst on the product development team is more conservative, indicating that parts cost may well be $100 per unit. In addition, the analyst suggests that a sales volume of 10,000 units is more realistic. Using the most likely value of $45 per unit for the direct labor cost, what is the first-year profit using the financial analyst’s estimates?
c. Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios such as those suggested by the engineer and the financial analyst?