Question
You are high level decision maker for a production company. You produce and export your products. You are aware of uncertainty in the market and
You are high level decision maker for a production company. You produce and export your products. You are aware of uncertainty in the market and trying to predict your end of 2020 profit. * From analysis of past contracts and documents you found out that average price for the past was SAR 37.5, and that prices of individual sales is uniformly distributed between SAR 35 and 40 * Your marketing and sales manager forecasts that your sales number would be 1.1 million units for 2021 with standard deviation of 180000 units. Sales quantity is normally distributed. * Raw material and transportation are variable costs. Based on past data, these costs are equal to an average of 50% of sales price. * There are fixed cost items such as managerial costs and salaries. They are calculated based on SAR and they are uniformly distributed between 25.000.000 - 35.000.000 SAR (20 POINTS) Please use Monte Carlo Simulation and answer below questions.
What is the simulated chance of making a profit in 2021? What is the expected profit? A business partner offers to take over the business for one year for 20 million SAR. Should you take the deal? Why /why not?
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