Question
Explain how inventory and investment management are related to this example regarding Discount rate/cost, Warranty period, NPV, etc.? Step 1: Simulation Model: Warranty costs for
Explain how inventory and investment management are related to this example regarding Discount rate/cost, Warranty period, NPV, etc.?
Step 1:
Simulation Model:
Warranty costs for camera |
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Inputs |
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Parameters of time to failure distribution of any new camera (Gamma) |
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Desired mean | 2.5 |
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Desired stdev | 1 |
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Implied alpha | 6.250 |
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Implied beta | 0.400 |
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Warranty period | 1.5 |
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Cost of new camera (to customer) | $400 |
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Replacement cost (to company) | $225 |
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Discount rate | 8% |
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Simulation of new camera and its replacements (if any) |
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Camera | 1 | 2 | 3 | 4 | 5 |
Lifetime | 2.442 | NA | NA | NA | NA |
Time of failure | 2.442 | NA | NA | NA | NA |
Cost to company | 0 | 0 | 0 | 0 | 0 |
Discounted cost | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
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Failures within warranty | 0 |
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NPV of profit from customer | $175.00 |
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Simulation Results:
Failures within warranty simulation results:
NPV of profit from customer simulation results:
Step 2: Week 5 Reflection
This week I learned what a simulation model is and how a distribution model is used in running simulations. I learned that a distribution can be continuous (meaning all continuous values in a distribution range) or discrete (meaning a discrete set of values in a distribution range). I learned how to use the RISK tools in excel to run a simulation which I captured the output above. I learned about the flaw of averages and how it impacts simulations. I also learned how the input variables distribution varies allow for multiple simulation runs or scenarios.
This weeks assignments took me about 8-10 hours.
Output for NPV profit for Customer |
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| NPV of profit from customer / 1 | ||
Cell | Model!B23 |
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Minimum | ($402.35) |
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Maximum | $175.00 |
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Mean | $139.49 |
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Mode | $175.00 |
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Median | $175.00 |
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Std Dev | $90.04 |
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Skewness | -2.6712 |
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Kurtosis | 10.3668 |
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Values | 1000 |
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Errors | 0 |
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Filtered | 0 |
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Left X | ($33) |
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Left P | 5.00% |
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Right X | $175 |
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Right P | 95.00% |
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Dif. X | $207.92 |
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Dif. P | 90.00% |
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1% | ($224.94) |
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5% | ($32.92) |
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10% | ($28.27) |
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15% | ($25.48) |
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20% | $175.00 |
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25% | $175.00 |
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30% | $175.00 |
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35% | $175.00 |
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40% | $175.00 |
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45% | $175.00 |
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50% | $175.00 |
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55% | $175.00 |
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60% | $175.00 |
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65% | $175.00 |
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70% | $175.00 |
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75% | $175.00 |
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80% | $175.00 |
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85% | $175.00 |
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90% | $175.00 |
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95% | $175.00 |
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99% | $175.00 |
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