This problem asks you to construct a simple simulation model. If you do not own simulation...

This problem asks you to construct a simple simulation model. If you do not own simulation software, you can download a free, full-strength version of Crystal Ball for a 15-day trial. Point your browser to www.oracle.com/crystalball. (For detailed instructions, see the recommended “WEBSITES” at the end of this chapter.)

a. Problem 7 earlier asked you to extend the forecast for R&E Supplies contained in Table through 2013. Using the same spreadsheet, simulate R&E Supplies’ external funding requirements in 2013 under the following assumptions.

i. Represent the growth rate in net sales as a triangular distribution with a mean of 30 percent and a range of 25 percent to 35 percent.

ii. Represent the interest rate as a uniform distribution varying from 9 percent to 11 percent.

iii. Represent the tax rate as a lognormal distribution with a mean of 45 percent and a standard deviation of 2 percent.

b. If the treasurer wants to be 95 percent certain of raising enough money in 2013, how much should he raise? (Grab the triangle below the frequency chart on the right and move it to the left until 95.00 appears in the “Certainty” window.)

Problem 7

An Excel spreadsheet containing R&E Supplies’ 2012 pro forma financial forecast as shown in Table is available for download at www.mhhe.com/higgins10e (Select Student Edition > Choose a Chapter > Files.) Using this spreadsheet, the information presented in the following list of figures, and the modified equations determined earlier in question 6, extend the forecast for R&E Supplies contained in Table through 2013.

TABLE Forecasting with a Computer Spreadsheet: Pro Forma Financial Forecast for R&E Supplies, Inc., December 31, 2012 ($ thousands)