Groove Street Games (GSG) is developing a new free-to-play, massive multiplayer online crime simulator game and wishes to create a simulation model to estimate the expected NPV of the game. GSG faced several uncertain factors and made the following assumptions that would hopefully help them build a simulation model. • Product Life: It is equally likely that the game will stay operational for 1, 2, 4, 6, or 8 years, but there is a 10% possibility that the game will stay operational for the next 10 years. • Microtransaction Rate: GSG estimates that there is a 50% chance that at least 30% of the players would purchase at least one in-game cash item, but there is also an equal chance that the number would fall below 10%. GSG is confident that the distribution of the microtransaction rate closely resembles a bell shape. • Market Share: GSG believes its market share in year 1 would be at best 70%, most likely 35%, and at worst 10%. • Server Maintenance Cost: The annual server maintenance cost is equally likely to be any value between 8 million to 18 million. • Further Development Cost: To keep the players entertained, GSG would occasionally release brand new content to the game, and GSG is 90% certain that the development cost will be anywhere between 5 million and 10 million with an average of 7.5 million. • Piracy Rate: Due to GSG's lack of proper security, there is a 30% chance that each year, a bootleg version of the game with better content and player interaction would be setup at a private server that would slightly reduce GSG's market share. Q1: What @Risk function, including its parameters, is appropriate to simulate the Microtransaction Rate? Q2: What @Risk function, including its parameters, is appropriate to simulate the Market Share? Q3: What @Risk function, including its parameters, is appropriate to simulate the Server Maintenance Cost? Q4: To celebrate the first anniversary of the game's launch, GSG decides to design a roulette with 35 numbers, ranging from 1 to 34. The higher the number, the more in-game cash the player gets. Which Excel function should GSG implement, assuming the roulette is not rigged and is fair?

Groove Street Games (GSG) is developing a new free-to-play, massive multiplayer online crime simulator game and wishes to create a simulation model to estimate the expected NPV of the game. GSG faced several uncertain factors and made the following assumptions that would hopefully help them build a simulation model. • Product Life: It is equally likely that the game will stay operational for 1, 2, 4, 6, or 8 years, but there is a 10% possibility that the game will stay operational for the next 10 years. • Microtransaction Rate: GSG estimates that there is a 50% chance that at least 30% of the players would purchase at least one in-game cash item, but there is also an equal chance that the number would fall below 10%. GSG is confident that the distribution of the microtransaction rate closely resembles a bell shape. • Market Share: GSG believes its market share in year 1 would be at best 70%, most likely 35%, and at worst 10%. • Server Maintenance Cost: The annual server maintenance cost is equally likely to be any value between 8 million to 18 million. • Further Development Cost: To keep the players entertained, GSG would occasionally release brand new content to the game, and GSG is 90% certain that the development cost will be anywhere between 5 million and 10 million with an average of 7.5 million. • Piracy Rate: Due to GSG's lack of proper security, there is a 30% chance that each year, a bootleg version of the game with better content and player interaction would be setup at a private server that would slightly reduce GSG's market share. Q1: What @Risk function, including its parameters, is appropriate to simulate the Microtransaction Rate? Q2: What @Risk function, including its parameters, is appropriate to simulate the Market Share? Q3: What @Risk function, including its parameters, is appropriate to simulate the Server Maintenance Cost? Q4: To celebrate the first anniversary of the game's launch, GSG decides to design a roulette with 35 numbers, ranging from 1 to 34. The higher the number, the more in-game cash the player gets. Which Excel function should GSG implement, assuming the roulette is not rigged and is fair?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 12P

See similar textbooks

Related questions

Question

Transcribed Image Text:Groove Street Games (GSG) is developing a new free-to-play, massive multiplayer online crime simulator game and wishes to create a simulation model to estimate the expected NPV of the game. GSG faced several uncertain factors and made the following assumptions that would hopefully help them build a simulation model. • Product Life: It is equally likely that the game will stay operational for 1, 2, 4, 6, or 8 years, but there is a 10% possibility that the game will stay operational for the next 10 years. • Microtransaction Rate: GSG estimates that there is a 50% chance that at least 30% of the players would purchase at least one in-game cash item, but there is also an equal chance that the number would fall below 10%. GSG is confident that the distribution of the microtransaction rate closely resembles a bell shape. • Market Share: GSG believes its market share in year 1 would be at best 70%, most likely 35%, and at worst 10%. • Server Maintenance Cost: The annual server maintenance cost is equally likely to be any value between 8 million to 18 million. • Further Development Cost: To keep the players entertained, GSG would occasionally release brand new content to the game, and GSG is 90% certain that the development cost will be anywhere between 5 million and 10 million with an average of 7.5 million. • Piracy Rate: Due to GSG's lack of proper security, there is a 30% chance that each year, a bootleg version of the game with better content and player interaction would be setup at a private server that would slightly reduce GSG's market share. Q1: What @Risk function, including its parameters, is appropriate to simulate the Microtransaction Rate? Q2: What @Risk function, including its parameters, is appropriate to simulate the Market Share? Q3: What @Risk function, including its parameters, is appropriate to simulate the Server Maintenance Cost? Q4: To celebrate the first anniversary of the game's launch, GSG decides to design a roulette with 35 numbers, ranging from 1 to 34. The higher the number, the more in-game cash the player gets. Which Excel function should GSG implement, assuming the roulette is not rigged and is fair?

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here