Question

To generate leads for new business, Gustin Investment Services offers free financial planning seminars at major hotels in Southwest Florida. Gustin conducts seminars for groups of 25 individuals. Each seminar costs Gustin $3900, and the average first-year commission for each new account opened is $4500. Gustin estimates that for each individual attending the seminar, there is a 0.01 probability that he/she will open a new account.

Simulation Trial	New Accounts
1	0
2	1
3	0
4	0
5	1
6	1
7	0
8	0
9	1
10	0
11	0
12	0
13	0
14	2
15	0
16	0
17	0
18	0
19	0
20	0
21	2
22	2
23	0
24	0
25	1

1. Construct a spreadsheet simulation model to analyze the profitability of Gustin’s seminars. Round the answer for the expected profit to the nearest dollar. Round the answer for the probability of a loss to 2 decimal places.

The expected profit from a seminar is $_________ and there is a ______ probability of a loss.

2. How large of an audience does Gustin need before a seminar’s expected profit is greater than zero? Use Trial-and-error method to answer the question. Round your answer to the nearest whole number.

Answer 1

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ANSWER:

1. Expected profit = (- $1336) and Probability of a loss = 0.68

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2. According to spreadsheet, solution 'd.',

Current profits over 25 trials = -$33400 and Expected profit per trial = -$1336

=> They need to change their current format by increasing number of people attending the new seminar.

Current population size attending 1 seminar = 25

New (least) population size attending 1 seminar = 39

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