QM323 Final Exam Question Bank 2

Question 1

Scenario Analysis is best suited to accomplishing which of the following when analyzing a project?
A. Determining the minimal level of sales required to break-even on an accounting basis
B. Determining the level of sales required to break-even on a financial basis
C. Identifying the potential range of reasonable outcomes
D. All of the above
E. None of the above

Answer 1

C. Identifying the potential range of reasonable outcomes

Question 2

What is the formula used to find the percentage of times NPV located in cells G10:G1010 is negative?

Answer 2

=COUNTIF(G10:G1010, “<0”)/COUNT(G10:G1010)

Question 3

Find the maximum/minimum of a function while satisfying a set of conditions

Answer 3

Constrained optimization

Question 4

What are the three dimensions of risk?

Answer 4

Expected magnitude of the impact of the event, probability of the event, and duration of the event

Question 5

A tornado chart displays…

Answer 5

the variability in the output variable attributable to the variability of each input that is varying randomly

Question 6

Which of these distributions describes rolling a dice with 6 sides?
A. Normal
B. Uniform
C. Discrete
D. A and C
E. B and C

Answer 6

E. Uniform and Discrete

Question 7

You draw demand from a Uniform distribution using the function=RANDBETWEEN(100,300). You replicate this demand 100 times and take average of drawn demand values. Which of these is not a feasible value for the average?
a. 190
b. 195
c. 200
d. 205
e. All are possible

Answer 7

e. All are possible

Question 8

Consider the following products in a grocery store: Almond Butter, PeanutButter, Jelly and Bread. You also know that Peanut Butter and Jelly are quite a common combination for a sandwich.If there is a decrease in the price of Almond Butter, what might happen to the demand for Peanut Butter? Provide an explanation.
a. Demand will go up
b. Demand will go down
c. Demand will stay the same
d. Not enough information to make a decision

Answer 8

b. Demand will go down

Question 9

The demand for coffee is estimated as Quantity Sold (thousands of units) =100 – 5Price + 0.1Income (where the income is measured in thousands of dollars)If income increase by $10,000 the average units sold of coffee are expected to increase by ____________ (in thousands)

Answer 9

1 or 1 thousand

Question 10

Team Sunset estimated that the break-even sensitivity to the Starting Segment Size is -20%. If the base case Starting Segment Size is 10,000,000, the Starting Segment Size that would yield an NPV of $0 is ___________

Answer 10

8,000,000

Question 11

A Core team is using simulations to estimate the distribution of NPV under the assumption that purchase intent, equally distributed above and below the base case, follows a uniform distribution with minimum of 10% and maximum of 30%. The base case of the purchase intent is _______

Answer 11

20% as the uniform distribution is symmetric

Question 12

The base case NPV is $1,000,000 for a Core project. The NPV elasticity with respect to Awareness is estimated to be equal to 10%. If Awareness increases by 1%, the NPV will be equal to $________________

Answer 12

1,100,000 (an increase of 10%)

Question 13

Assume we believe the value of some variable to be anywhere between 100 and 200. Which of these distributions would indicate that we have the least certainty regarding where the variable estimate lies within that range?

a) Uniform
b) Discrete
c) Normal
d) Triangular

Answer 13

a) Uniform

Question 14

Company A makes bulbs which have a lifetime described by a Uniform distribution ranging from minimum of 1000 to a maximum of 3000 hours and a warranty of 2000 hours. Company B makes bulbs which have a lifetime described by a Normal distribution with a mean of 1500 hours and a standard deviation of 250 hours. They also provide a warranty of 2000 hours. Which company is likely to spend more money on warranty claims?

a) Company A
b) Company B
c) Both companies have equal risk
d) not enough information

Answer 14

Company B

Question 15

When you roll a twelve-sided dice as shown below, what type of distribution do you expect?
a) Uniform and Continuous
b) Normal and Discrete
c) Triangular
d) Discrete and Uniform
e) Discrete and Continuous

Answer 15

d) Discrete and uniform

Question 16

Consider the discrete distribution used in class for the demand of calendars.The distribution is given by the demands of {100, 150, 200, 250, 300} with probabilities of {.3, .2, .3, .15, .05} respectively. What is the expected value(mean) of this distribution?

Answer 16

172.5

Question 17

The height distribution of the Australian population is assumed to be symmetric. The average height is estimated to be 1.7 meters. This means that approximately _____% of the population is taller than 1.7 meters.

Answer 17

50%

Question 18

One of the major risks when determining the transportation and shippingc osts are the fluctuations of the global supply of oil. A team estimated that the average price for gasoline for the next year will be $3.00 with a standard deviation of $2.00. This means that there is about 2.5% probability that the price of gasoline will be greater or equal to $_____

Answer 18

7 dollars

Question 19

The team now wants to implement their segment size simulation. They believe their segment size has a base case of 10 million with a standard deviation that is 20% of the base case. The formula they should enter in the“Formula for Simulation”, assuming the formula attaches to the segment size sensitivity cell, is _____________

Answer 19

=(MAX(NORM.INV(RAND( ),1,0.2),0)

Question 20

Formula to draw random demand from a normal distribution with base case mean and std dev 20% of the base case

Answer 20

=MAX(NORM.INV(RAND(),1,0.2),0)

Question 21

Formula to draw random demand from a discrete distribution with cumulative probability located in table “Lucy”. Demand located in column 2

Answer 21

=VLOOKUP(RAND( ),LUCY,2)