Monte Carlo Simulation: Lyft provides an app-based transportation service and it is one of the fastest growing companies with a strong investor backing. In this homework, you are going to be simulating a simplified version of Lyft's future cash flow in US for the coming 5 years, 2019 through 2023: Here is the information on the current numbers and future estimates for the US market:
Annual revenue = Average Number of Annual Rides* Average Price Per Ride Average PRICE Per ride = 5 x Both Average Daily Rides and Price Per Ride are random variables for 2019 through 2023 . You will need to come up with the probability distributions for each using the past data and the following guide . Current Average Price Per Ride Estimate the current average price per Lyft Ride by collecting Your own data . An average Lift ride* 8 6 miles . Enter & G mile ride on Lyft app on your phone . Get the price for the same trip at the following times : ? weekdays and one weekend , at Bam , 12 01 , 3 01 , 5:30 0m, 10 0m ." Take the arithmetic average . Future Average Price Per Ride is expected to go up at the same rate as the inflation rate each year . Find a discrete probability* distribution for inflation using the data provided here . http:/ / www . usinflationcalculator . com" inflation consumer - price _ index_ and_ annual _ percent - changes - from - 19/13_ to _ 20 0 B^ Use only the data provided in the last column from 1982 to 2018 . Find the maximum and minimum inflation occurred during this period , divide the range into five equal sub-ranges and assign a probability to the mid - point of each range by using the frequency with which inflation occurred on this range in the past . Use this probability distribution for each of the years 2019 through 2023 . Please assume that probability distribution is independent* across years . Average Number of Annual Rides Some of the major parameters Lyft's average annual ridership depends upon are GDP growth rate , unemployment rate , consumer confidence index , and the gas prices ."You can think of other variables that would be instrumental in affecting LY it's ridership ."To keep things simple , I provided a highly stylized model where we assume the ridership depends only on GDP growth . Average Annual Rides = 400, 040 + &, a40, ```* annual GDP growth rate Again , find a discrete probability distribution for GDP growth rate using the data provided in an Excel file titled "World Bank GOP growth data" . MU'sE data from 1982 10 2010 for United States only ) Employ the same approach as you did with the inflation probability distribution .Using the above information, answer the following: Due to its unconventional pricing l[dynamic pricing, depending on s1.1p]:Ilj.r and demand) and 1various claims on safety.r and regulation issues, company is expected to spend a considerable amount on legal settlements. Ly aims to be able to cover its settlement costs with the revemle it obtains from operations for the coming 5 years 90% ofthe time. on average. The settlement expense for 2019 through 2023 is expected to be a total of EX in today's dollars. Ii'the discount rate is 5%, estimate X by running a Monte Carlo Simulation LUIII times. Excel Help: You need to generate random variables. Enter \"=RAND\" in, say. cell A1, and Excel will return a random variable between El and 1. Each time you press enter on cell ll, this number will change Entering \"=IF[AI{.25,]U,lF{A3~=:.5 ZUIJJFIAJQTSJDUADUJH\" will return one of the following numbers with equal probability: [DUI or 200 or 300 or dill]
