Racquet-Zapper, a new electronic fly swatter, has been test-marketed at several home stores in the Phoenix area. After a successful test market, the developers have decided to launch the product nation-wide so they are looking for venture capitalists to invest. Here is the sales data that they have provided for you to consider:

Based on the test market, sales predictions for the Racquet-Zapper are as follows:

Units SoldProbability150000.300250000.550450000.150

Fixed costs for the production is Normally Distributed with a mean of $475,000 and a standard deviation of $65,000.

Variable cost is $17 per unit and the selling price is $39.

a) In Excel, use simulation to calculate the expected net profit. Run 50 trials simulating the demand and the costs. Find the average net profit for the 50 trials.

b) Given the uncertainty in the demand and fixed costs for this investment and the inherent risk in investing in this company, based on your analysis, is this a good investment, why or why not?