1. An entrepreneur who would like to open a retail facility similar to the one discussed in the chapter has approached you. By coincidence, it is the same entrepreneur whose decisions we have been studying. The entrepreneur is offering 0% of the equity of the venture for each $10,000 you invest and will contribute $400,000 to the project. Suppose you agree with the entrepreneurs assumptions, as set out in Figure 6.6 for the large facility and elsewhere in the chapter for the small facility, including the PV assumptions. Use simulation to examine the opportunity from your perspective instead of the entrepreneurs.
   1. What is the NPV of your investment in the large facility if there are no options and investment is immediate?
   2. What is the NPV of your investment in the small facility if there are no options and investment is immediate?

4. Specify the assumptions and uncertainties Assumptions and statistical processes of the large-facility model Variable Assumption PV Unit Normal Distribution (u = $10, 0 = $1) PV Unit Normal Distribution (u = $5, o = $0.6) Market Size Estimate (after first year) Triangular Distribution (6, 2.6, 1 million units) Market Size Normal Dist. (u = estimate, o = 100,000) Market Share Estimate (after first year) Normal Distribution (u = 10%, o = 1%) Market Share Normal Distribution (u = estimate, o = 0.3%) Capacity 500,000 units PV Fixed Costs Normal Dist. (u = $500,000, o = $50,000) Total Investment Normal Dist. (u = $750,000, o = $25,000) Entrepreneur Investment $400,000 Percent Equity Per Dollar Invested 1% per $10,000 of outside investment u = mean or average, o = standard deviation 4. Specify the assumptions and uncertainties Assumptions and statistical processes of the large-facility model Variable Assumption PV Unit Normal Distribution (u = $10, 0 = $1) PV Unit Normal Distribution (u = $5, o = $0.6) Market Size Estimate (after first year) Triangular Distribution (6, 2.6, 1 million units) Market Size Normal Dist. (u = estimate, o = 100,000) Market Share Estimate (after first year) Normal Distribution (u = 10%, o = 1%) Market Share Normal Distribution (u = estimate, o = 0.3%) Capacity 500,000 units PV Fixed Costs Normal Dist. (u = $500,000, o = $50,000) Total Investment Normal Dist. (u = $750,000, o = $25,000) Entrepreneur Investment $400,000 Percent Equity Per Dollar Invested 1% per $10,000 of outside investment u = mean or average, o = standard deviation