San Diego State University is considering the addition of a new accelerated MBA program. The university wants to use the Monte Carlo Simulation to see if it is a feasible plan. You have been invited to model and execute this simulation analysis for them. The planning horizon is ten years with the following assumptions:

• The duration of the program is 10 months. Every year, a new cohort starts the program. During the next 10 years, the program will be run 10 times (once every year).
• The number of enrollment in the first year is estimated to be any number between 10-15 (uniform discrete). After the first year, annual enrollment is expected to either go up by 10% (probability of 0.5), stay the same (probability of 0.3), or decrease by 4% (probability of 0.2) from a year to the next year.
• The program consists of 31 units. Students need to complete all units to be considered graduates.
• REVENUE: the program is completely self-funded and the only source of revenue is Tuition. The university plans to charge $600 per unit in the first year with a 2% constant rate of increase per year. When computing the revenue, please note that not all students finish the program: about 80% of students finish the program and take all 31 units. For the other 20% who drop out of the program, the average number of units they take before dropping out can be any number between 6 to 12 (uniform discrete). Assume the tuition paid to the university is non-refundable.
• COSTS: there are three types of cost: Faculty, Staff/Admin, and Equipment.
  • Faculty/Lecturer costs about $3000 per unit regardless of the number of enrollments (i.e., 3000 x 31 for the first year). The cost is expected to increase with a flat 2% rate.
  • The program will need 2 staff with an annual salary of 55000. There is also an annual overhead cost that can be found using a normal distribution with a mean of 20,000 and a standard deviation of 5000 (random variable).
  • Equipment cost can be either 50,000, 60000, or 70,000 with probabilities of 0.3, 0.5, and 0.2, respectively.

Assuming there is no investment cost before launching the program, you need to find the distribution for the NPV of the program for the university.

Please note that you need to run the simulation 1000 times before you can analyze the distribution of NPV. Please present mean, median, st_dev, range, and histogram.

Do you recommend starting the program from a cost-benefit perspective? p.s., this is an extremely simplified version of the problem as we all know that there are definitely more benefits and more costs associated with starting a new educational program.