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
Inputs
Parameters of time to failure distribution of any new camera (Gamma)
Desired mean	2.5
Desired stdev	1
Implied alpha	6.250
Implied beta	0.400
Warranty period	1.5
Cost of new camera (to customer)	$400
Replacement cost (to company)	$225
Discount rate	8%
Simulation of new camera and its replacements (if any)
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
Failures within warranty	0
NPV of profit from customer	$175.00

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 week’s assignments took me about 8-10 hours.

Output for NPV profit for Customer
	NPV of profit from customer / 1
Cell	Model!B23
Minimum	($402.35)
Maximum	$175.00
Mean	$139.49
Mode	$175.00
Median	$175.00
Std Dev	$90.04
Skewness	-2.6712
Kurtosis	10.3668
Values	1000
Errors	0
Filtered	0
Left X	($33)
Left P	5.00%
Right X	$175
Right P	95.00%
Dif. X	$207.92
Dif. P	90.00%
1%	($224.94)
5%	($32.92)
10%	($28.27)
15%	($25.48)
20%	$175.00
25%	$175.00
30%	$175.00
35%	$175.00
40%	$175.00
45%	$175.00
50%	$175.00
55%	$175.00
60%	$175.00
65%	$175.00
70%	$175.00
75%	$175.00
80%	$175.00
85%	$175.00
90%	$175.00
95%	$175.00
99%	$175.00