The Smith family wishes to build a new home on a budget of $350,000, and has received estimates for each of the construction components from the General Contractor, as given in the table on the following page. Create a simulated model of the construction costs, and use it to answer the questions below. Submit both a word document with the answers and a supporting Excel file OR a word document with the answers and screenshots of your simulation output graphs from @Risk.

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1) Based on the most likely cost estimates, what is the expected cost of the building the house with only the mandatory items, and how does it compare to the budget?

2) Simulate the cost of building the house in @Risk or similar software. What is the expected cost of building the house using this method? Which should the Smith family use to make a decision? Do not just describe the difference in methods, explain why the results are different.

3) What is the probability that the Smiths will exceed their budget of 350K with only the mandatory items?

4) If the Smiths include all three of the optional items, how much would they need to budget to be 90% certain they could meet all costs?

Mandatory Items

Architect                              $27,000                 $40,000                 $51,000

Bath Fixtures                     $7,000                   $8,000                   $12,000

Built-in Appliances           $1,600                   $2,000                   $3,500

Cabinets                              $5,000                   $6,000                   $10,000

Carpeting                            $4,000                   $5,000                   $7,000

Doors                                    $3,500                   $4,000                   $8,000

Excavation                          $2,500                   $2,500                   $5,000

Finish Carpentry               $7,000                   $7,500                   $10,000

Finish Hardware               $1,250                   $1,500                   $2,000

Foundation                         $22,000                 $25,000                 $30,000

Garage Doors                    $2,700                   $3,000                   $4,500

Gas Fireplaces                   $1,700                   $2,000                   $3,000

General Contractor         $30,000                 $40,000                 $55,000

Heating and Cooling        $10,000                 $12,000                 $15,000

Insulation                            $3,750                   $4,000                   $5,500

Painting                                $2,750                   $3,000                   $4,500

Plumbing                             $6,200                   $7,000                   $8,500

Roofing                                $11,500                 $12,000                 $15,000

Rough Carpentry              $110,000              $120,000              $150,000

Windows                             $18,500                 $20,000                 $27,000

Wiring                                   $6,000                   $6,500                   $8,500

Optional Items

Countertops                      $4,000                   $6,000                   $9,000

Flooring                                $9,000                   $10,000                 $13,000

Lighting Fixtures               $2,750                   $3,000                   $6,000