Problem 16-05
(Algorithmic)
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 $3600, and the average first-year commission for each new
account opened is $5500. Gustin estimates that for each individual
attending the seminar, there is a 0.01 probability that he/she will
open a new account.
- Determine the equation for computing Gustin’s profit per
seminar, given values of the relevant parameters. Round your
answers to the nearest dollar.
Profit = (New Accounts Opened × $__________ ) – $
__________
- What type of random variable is the number of new accounts
opened? (Hint: Review Appendix 16.1 for descriptions of
various types of probability distributions.)
The number of new accounts opened is a __________
random variable with trials and probability
of a success on a single trial. (Dropdown = binomial, discrete,
continuous)
- Assume that the number of new accouts you get randomly
is:
Simulation Trial |
New Accounts |
1 |
0 |
2 |
0 |
3 |
0 |
4 |
0 |
5 |
2 |
6 |
1 |
7 |
1 |
8 |
0 |
9 |
1 |
10 |
0 |
11 |
0 |
12 |
0 |
13 |
0 |
14 |
1 |
15 |
0 |
16 |
1 |
17 |
0 |
18 |
1 |
19 |
1 |
20 |
0 |
21 |
0 |
22 |
0 |
23 |
0 |
24 |
0 |
25 |
0 |
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.
Would you recommend that Gustin continue running the
seminars?
Gustin __________ the seminars in their current format.
(Dropdown = should continue to run, should rise the price of,
should consider discontinuing)
- 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.
__________ attendees
QUANTITATIVE METHODS FOR BUSINESS 13
EDITION