In: Math
Problem 12-15 (Algorithmic)
Strassel Investors buys real estate, develops it, and resells it
for a profit....
Problem 12-15 (Algorithmic)
Strassel Investors buys real estate, develops it, and resells it
for a profit. A new property is available, and Bud Strassel, the
president and owner of Strassel Investors, believes if he purchases
and develops this property it can then be sold for $170000. The
current property owner has asked for bids and stated that the
property will be sold for the highest bid in excess of $100000. Two
competitors will be submitting bids for the property. Strassel does
not know what the competitors will bid, but he assumes for planning
purposes that the amount bid by each competitor will be uniformly
distributed between $100000 and $150000.
- Develop a worksheet that can be used to simulate the bids made
by the two competitors. Strassel is considering a bid of $120000
for the property. Using a simulation of 1000 trials, what is the
estimate of the probability Strassel will be able to obtain the
property using a bid of $120000? Round your answer to 1 decimal
place. Enter your answer as a percent.
%
- How much does Strassel need to bid to be assured of obtaining
the property?
$
What is the profit associated with this bid?
$
- Use the simulation model to compute the profit for each trial
of the simulation run. With maximization of profit as Strassel’s
objective, use simulation to evaluate Strassel’s bid alternatives
of $120000, $145000, or $150000. What is the recommended bid, and
what is the expected profit?
A bid of $145000 results in the largest mean profit of
$ .