Truckco produces the OffRoad truck. The company wants to gain information about the discounted profits earned during the next three years. During a given year, the total number of trucks sold in the United States is 500,000  50,000G  40,000I where G is the percentage increase in gross domestic product during the year and I is the percentage increase in the consumer price index during the year.

During the next 3 years, Value Line has made the predictions listed in the file P12_54.xlsx. In the past, 95%

of Value Line’s G predictions have been accurate within 6%, and 95% of Value Line’s I predictions have been accurate within 5%. We assume that the actual G and I values are normally distributed each year.

At the beginning of each year, a number of competitors might enter the trucking business. The probability distribution of the number of competitors that will enter the trucking business is also given in the file P12_54.xlsx. Before competitors join the industry at the beginning of year 1, there are two competitors.

During a year that begins with n competitors (after competitors have entered the business, but before any have left), OffRoad will have a market share given by 0.5(0.9)n. At the end of each year, there is a 20%

chance that any competitor will leave the industry. The selling price of the truck and the production cost per truck are also given in the file P12_54.xlsx. Simulate 1000 replications of Truckco’s profit for the next 3 years. Estimate the mean and standard deviation of the discounted 3-year profits, using a discount rate of 10%. You can use Excel’s NPV function here. Do the same if there is a 50% chance during each year that any competitor will leave the industry.