Exhibit 10-1A Company Is in the Planning Phase of Constructing $$\approx \sqrt { 202 + 502 + 302 } = 61.6$$

question 5

Essay

Exhibit 10-1A company is in the planning phase of constructing a new production facility. It wants to build a simulation model for the economics of the facility, and one key uncertain input is the construction cost. For each of the scenarios in the questions below, choose an "appropriate" distribution, together with its parameters, and explain your choice.
-If you add n lognormally distributed random numbers, the mean of the distribution for the sum is the sum of the individual means, and the variance of the distribution of the sum is the individual variances. This result is difficult to prove mathematically, but it is easy to demonstrate with simulation. To do so, run a simulation where you add three lognormally distributed random numbers, with means of 300, 700 and 100, and standard deviations of 20, 50, and 30, respectively. Your single output variable should be the sum of these three numbers. Verify with @RISK that the distribution of this output has a mean of 1,000 and standard deviation .
$$\approx \sqrt { 202 + 502 + 302 } = 61.6$$

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Definitions:

Trade Alliance

A partnership between two or more countries or organizations to improve trade relations and economic cooperation.

Initial Public Offering

The first sale of a company’s shares to the public, leading to a stock exchange listing.

Entrepreneurial Venture

A business undertaking initiated by an individual or group who seeks to innovate, create, and manage the enterprise for growth and profit.

Equity Takeover

The acquisition of control of a company through the purchase of a significant amount of its equity shares.