2. (40 points) An investment of $400,000 is made at time zero. Revenues are expected to be either $80000, $90000, or $100000 in year 1, with equal probability. In addition, revenues will grow either $10,000 per year, with probability 0.6, or $5000 per year with probability 0.4. Costs will either be $50,000 (probability 0.6) or $60,000 (0.4) per year. There is no salvage value. a. Perform five hand simulations (use Excel to help with the simulation "roll the dice"), assuming a 12 year horizon with no salvage value. Compute the mean and standard deviation of the present worth, and compute the probability of success. The interest rate is 18%. Plot the mean after each simulation run. Is this enough information to make a rational decision? Explain. b. Repeat the previous problem, but generate 250 simulation runs with Excel. 2. (40 points) An investment of $400,000 is made at time zero. Revenues are expected to be either $80000, $90000, or $100000 in year 1, with equal probability. In addition, revenues will grow either $10,000 per year, with probability 0.6, or $5000 per year with probability 0.4. Costs will either be $50,000 (probability 0.6) or $60,000 (0.4) per year. There is no salvage value. a. Perform five hand simulations (use Excel to help with the simulation "roll the dice"), assuming a 12 year horizon with no salvage value. Compute the mean and standard deviation of the present worth, and compute the probability of success. The interest rate is 18%. Plot the mean after each simulation run. Is this enough information to make a rational decision? Explain. b. Repeat the previous problem, but generate 250 simulation runs with Excel