Use the information below to answer the following 11 questions. Below is a spreadsheet for Trance Electronics.

	A	B	C	D	E	F
1	Trance Electronics
2
3	Data
4
5	Market size	20,000,000
6	Unit (monthly Rx) revenue	$ 120.00
7	Unit (monthly Rx) cost	$ 50.00
8	Discount rate	8%
9
10	Project costs
11	R&D	$ 750,000,000
12	Clinical Trials	$ 100,000,000
13	Total Project Costs
14
15	Model
16
17	Year	1	2	3	4	5
18	Market growth factor		4%	4%	4%	4%
19	Market size
20	Market share growth rate		18%	18%	18%	18%
21	Market share	7%
22	Sales
23
24	Annual revenue
25	Annual costs
26	Profit
27	Cumulative net profit
28
29	Net present value

Suppose that the project manager of Trance Electronics has identified the following uncertain variables in the model and the distributions and parameters that describe them, as follows: Market size: normal with mean of 20,000,000 units and standard deviation of 4,000,000 units. R&D costs: uniform between $600,000,000 and $800,000,000. Clinical trial costs: lognormal with mean of $150,000,000 and standard deviation $30,000,000. Annual market growth factor: triangular with minimum = 2%, maximum = 6%, and most likely = 3%. Annual market share growth rate: triangular with minimum = 15%, maximum = 25%, and most likely = 20%. The number of trials per simulation is equal to 10,000 at a Sim. Random Seed of 2. Run the simulation and answer the following questions using the Risk Solver Platform. What is the standard deviation obtained from the simulation results of the net present value? [Hint: Choose the approximate value.]

$204,868,924

$162,135,408

$182,992,245

$138,134,040

What is the coefficient of variation obtained from the simulation results of the net present value? [Hint: Check the Advanced Statistics and choose the approximate value.]

1.78392

-2.23958

-1.36659

2.87645

What is the expected loss ratio obtained from the simulation results of the net present value? [Hint: Check the Advanced Statistics and choose the approximate value.]

93.50%

72.45%

67.32%

86.32%

What is the risk that the net present value over the 5 years will not be positive? [Hint: choose the nearest value.]

approximately 40%

approximately 57%

approximately 24%

approximately 77%

What are the chances that the product will show a cumulative net profit in the fourth year? [Hint: Check the Percentiles and choose the approximate value.]

approximately 25%

approximately 18%

approximately 11%

approximately 32%

What cumulative profit in the fifth year is likely to be realized with a probability of 0.50? [Hint: Check the Percentiles and choose the approximate value.]

$78,244,098

$101,970,955

$144,058,696

$203,676,827

What is the correlation of the R&D cost with the NPV with reference to the sensitivity chart? [Hint: choose the approximate value.]

-0.404

0.028

0.908

-0.194

With reference to the trend chart, which year shows the highest mean net cumulative profit?

Year 1

Year 2

Year 4

Year 5

With reference to the trend chart, which year shows the highest uncertainty in forecasting the future?

Year 1

Year 3

Year 4

Year 5