master tech is a new software company that develops and markets productivity software for
government applications. The following is used when developing a balance sheet:
Gross profit = Net sales - Cost of sales
net operating profit = Gross profit - administrative expenses - sales expenses
sales costs = fixed costs + variable costs
Net profit before taxes = Net operating profit - interest
Net income = Net profit before taxes - Taxes
Net sales are evenly distributed between $ 600,000 and $ 1,200,000. The cost
sales are normally distributed, averaging $ 540,000 and a standard deviation of $ 20,000. Expenses
sales have a fixed item that is evenly distributed between $ 75,000 and $ 110,000. The
variable is estimated at 7% of net sales. Administrative costs follow.
Develop a net income risk study
using Crystal Ball and make a written report to the administration. The study must
includes the following
a) What is the expected net profit?
b) with a probability of 90% what is the lowest price that the net profit can get? Who
is the risk (in $)?
c) perform the sensitivity analysis to determine the contribution of each risk factor
to net profit. Comment on the size and sign (+ h -) of each risk factor
affects net profit.
d) What is the probability that MasterTech will have zero net profit
normal distribution, with an average of $ 50,000 and a standard deviation of $ 3,500. Interest costs are $ 10,000. THE
company is taxed at a rate of 50%.