Monte Carlo Simulation:

Uber 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 Uber's future cash flow in US for the coming 5 years, 2016 through 2020:

Here is the information on the current numbers and future estimates for the US market:

The revenue: Average Daily Rides and Average Price Per Ride, which are currently 1 million and $4, respectively.

Growth Projections: Uber's average daily ride number is estimated to go up by 8% with 0.3 probability, 12% with 0.6 probability and 18% with 0.1 probability each year independent of its realization in the previous year.

Average Price Per Ride is expected to go up 3% per year.

Using the above information, answer the following:

Due to its unconventional pricing (dynamic pricing, depending on supply and demand) and various claims on safety and regulation issues, company is expected to spend a considerable amount on legal settlements. Uber aims to be able to cover its settlement costs with the revenue it obtains from operations for the coming 5 years 90% of the time, on average. The settlement expense for 2016 through 2020 is expected to be a total of $X in today's dollars. If the discount rate is 5%, estimate X by running a Monte Carlo Simulation 1,000 times.

Excel Help:

You need to generate random variables. Enter "=RAND()" in, say, cell A1, and Excel will return a random variable between 0 and 1. Each time you press enter on cell A1, this number will change.

Entering "=IF(A1<.25,100,IF(A3<.5,200,IF(A3<.75,300,400)))" will return one of the following numbers with equal probability: 100 or 200 or 300 or 400.