Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

External Problem You are investor who has two businesses; the first is purchasing scraped cares and selling their parts as spare parts. The second is

image text in transcribed
External Problem You are investor who has two businesses; the first is purchasing scraped cares and selling their parts as spare parts. The second is dealing in used cars. The first business has a long term profit cycle, however it has a profit margin ranges from 60 % to 100 % of the purchasing price. The second has a short term profit cycle and has a profit margin ranges from 20% to 40% of the purchasing price. Now, you have an extra amount of money which is enough to be invested in only one of the two businesses. By adding this amount of investment to either of the two businesses, its sales are supposed to be doubled. 1) Establish a predictive model to find out, to which of the two businesses the new investment is supposed to be added. Consider the following notes and directions: a) Sales records during the last three years give the following monthly basis selling data: Sales of spare parts ranges between SR 500,000 and SR 1,000,000 Selling prices of cars vary between SR 12,000 and SR 150,000. The number of sold cars between 15 and 30. Consider appropriate period for your calculations and remember that ultimately you want to have maximum benefit from your investment Use random number generator to estimate the model parameters b) For your establish model, evaluate the Robustness and Sensitivity of the results. II) If the addition of the amount of investment to either of the two businesses will affect their sales in different manners, as following: If it is added to the first business it will increase its sales by 25% If it is added to the second business it will double its sales a) What will be your decision in this case? (i.e. which of the two businesses the new investment is supposed to be added). b) Evaluate the Robustness and Sensitivity of the results for the case discussed above. External Problem You are investor who has two businesses; the first is purchasing scraped cares and selling their parts as spare parts. The second is dealing in used cars. The first business has a long term profit cycle, however it has a profit margin ranges from 60 % to 100 % of the purchasing price. The second has a short term profit cycle and has a profit margin ranges from 20% to 40% of the purchasing price. Now, you have an extra amount of money which is enough to be invested in only one of the two businesses. By adding this amount of investment to either of the two businesses, its sales are supposed to be doubled. 1) Establish a predictive model to find out, to which of the two businesses the new investment is supposed to be added. Consider the following notes and directions: a) Sales records during the last three years give the following monthly basis selling data: Sales of spare parts ranges between SR 500,000 and SR 1,000,000 Selling prices of cars vary between SR 12,000 and SR 150,000. The number of sold cars between 15 and 30. Consider appropriate period for your calculations and remember that ultimately you want to have maximum benefit from your investment Use random number generator to estimate the model parameters b) For your establish model, evaluate the Robustness and Sensitivity of the results. II) If the addition of the amount of investment to either of the two businesses will affect their sales in different manners, as following: If it is added to the first business it will increase its sales by 25% If it is added to the second business it will double its sales a) What will be your decision in this case? (i.e. which of the two businesses the new investment is supposed to be added). b) Evaluate the Robustness and Sensitivity of the results for the case discussed above

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Stocks Bonds And The Investment Horizon

Authors: Haim Levy

1st Edition

9811250146, 978-9811250149

More Books

Students also viewed these Finance questions