1. Suppose you are bidding for an oil well that you believe will yield $40 million (including the cost of developing and mining the oil) in profits. Three competitors are bidding against you, and each competitors bid is assumed to follow a normal random variable, with a mean of $30 million and a standard deviation of $4 million. What should you bid (within $1 million)? (Maximum bid wins). THIS IS A SIMULATION EXAM. THE QUESTION HAS TO BE ANSWERED IN EXCEL FORMAT!!

profit Comp 1 bid Comp 2 bid Comp 3 bid my bid do I win? Profit mean profit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 rand 26 mean 27 sigma 28 29 30 31 32 33 34 35 36 profit Comp 1 bid Comp 2 bid Comp 3 bid my bid do I win? Profit mean profit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 rand 26 mean 27 sigma 28 29 30 31 32 33 34 35 36