Simulation

Q1 The investment corporation wants to study the investment projects based on three factors:
market demand in units; price per unit minus cost per unit and investment required. These factors
are felt to be independent of each other. In analyzing a new consumer product, the corporation
estimates the following probability distributions.

Annual Demand
Units Probability
20,000 0.05
25,000 0.10
30,000 0.20 Investment required
35,000 0.30 Rs Probability
40,000 0.20 17,50,000 0.25
45,000 0.10 20,00,000 0.50
50,000 0.05 25,00,000 0.25

Price minus Cost per unit

Rs Probability
3.00 0.10
5.00 0.20
7.00 0.40
9.00 0.20
10.00 0.10

Using simulation process, repeat the trial 10 times, compute the return on investment for each
trial taking these three factors into account. What is most likely return?

The random numbers are as follows

Demand 28 57 60 17 64 20 27 58 61 30
Price-cost 19 07 90 02 57 28 29 83 58 41
Investment 18 61 16 71 43 68 47 24 19 97

Q2 A company manufactures around 200 mopeds Depending upon the availability of raw
materials and other conditions, the daily production has been varying from 196 mopeds to 204
mopeds, whose probability distribution is given below
Production/day 196 197 198 199 200 201 202 203 204
Probability 0.05 0.09 0.12 0.14 0.20 0.15 0.11 0.08 0.06
The finished mopeds are transported in a specially designed three-storeyed lorry that can
accommodate only 200 mopeds Using the following 15 random numbers
82,89,78,24,53,61,18,45,04,23,50,77,27,54 and 10, simulate the process to find out
i) What will be the average number of mopeds waiting in the factory
ii) What will be average number of empty spaces in the factory

Q3 Shawn Bishop, a neuroscience PhD student at Clarksville University, has been having
problems balancing his checkbook. His monthly income is derived from a graduate research
assistantship; however, he also makes extra money in most months by tutoring undergraduates in
their introductory neurobiology course. His chances of various income levels are shown here
(assume that this income is received at the beginning of each month):

Bishop has expenditures that vary from month to month, and he estimates that they will follow
this distribution:

Bishop begins his final year with $1,500 in his checking account. Simulate the cash flow for 12
months and replicate your model N times to identify Bishop’s (a) ending balance at the end of
the year and (b) probability that he will have a negative balance in any month.

Q4 A project consists of eight activities A to H. The completion time for each activity is a
random variable. The data concerning probability distribution along with completion times for
each activity is as follows:
Activity Immediate Time(day)/Probability
Predecessor(s) 1 2 3 4 5 6 7 8 9
A - 0.2 0.4 0.4
B - 0.5 0.5
C A 0.7 0.3
D B,C 0.9 0.1
E A 0.2 0.8
F D,E 0.6 0.4
G E 0.4 0.4 0.2
H F 0.4 0.6