Question

I am having problems with an assignment for my class, I am struggling with part a of the following question. I included parts b-d as these additional questions may influence the answer to part a

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 $3500, and the average first-year commission for each new account opened is $5000. Gustin estimates that for each individual attending the seminar, there is a 0.01 probability that he/she will open a new account.

a. Construct a spreadsheet model that correctly computes Gustin's profit per seminar, given static values of the relevant parameters

b. What type of random variable is the number of new accounts opened?

c. Construct a simulation model to analyze the profitability of Gustin's seminars. Would you recommend that Gustin continue running seminars.

d. How many attendees does Gustin need before the seminar's average profit is greater than zero?

Answer 1

c.

profitability = expected no. of new account * $5000 - $3500

= (n*p)*$5000 - $3500

= 25*0.01*5000 - 3500

= $1250 - $3500 = - $2250

therefore on average he will incur loss of 2250 dollars

therefore, it is not recommended that Gustin continue running seminars.

P.S. (please upvote if you find the answer satisfactory)