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Your company has just won a contract with Fitbit to manufacture the waterproof wristband for the Fitbit Charge 4, its next generation fitness tracker. Fitbit says it will sell this item for $40 more than the current product (the Charge 3). Your marketing department has said the band should be sold to Fitbit for a higher price. Your boss has asked you to do an economic analysis on the Charge 3 case production process. Here is what you have found: Current selling price to Fitbit is $23 per wristband. This is locked in by a contract that ends June 30, 2019. One million (1 x 106) bands were sold to Fitbit in 2018. Your company will invest $19 million in 2019 Year O) to build the Charge 4 fabrication plant. No loan is needed. Start-up will be in early 2020. The project life will be set at 4 years and MARR is firm at 20%. There is risk in this proposal in two variables, from your marketing department's study. a) The usual cost to manufacture and deliver would be about $14 per wristband if there were no defect in the rubber-like material or the processing. From this past year's data, mean cost per band is u = $14.50 with standard deviation, o = $0.80 b) Fitbit will not guarantee a number of wristbands it will buy from you each year. Fitbit has agreed to buy exclusively from your company, but will only buy as many Charge 4 bands as they sell to the public. From sales data for similar products, here are estimates of the sales: Items sold per year relative frequency 600,000 0.06 700,000 800,000 0.20 900,000 1,000,000 1,100,000 a) Calculate the expected number of bands that will sell each year based on the past sales data given above. 0.12 0.30 0.25 0.07 Now simulate the economics of this project on a before-tax basis. You will use the Monte Carlo sampling/simulation technique and generate random deviates and/or random numbers as needed based on the type of variable and distribution. b) Using a selling price of $23/band, calculate the cash flow before taxes (CFBT) and the present worth of CFBT for 100 simulations. Sum up all the PW values and report whether you recommend approval or rejection of the project. Your company has just won a contract with Fitbit to manufacture the waterproof wristband for the Fitbit Charge 4, its next generation fitness tracker. Fitbit says it will sell this item for $40 more than the current product (the Charge 3). Your marketing department has said the band should be sold to Fitbit for a higher price. Your boss has asked you to do an economic analysis on the Charge 3 case production process. Here is what you have found: Current selling price to Fitbit is $23 per wristband. This is locked in by a contract that ends June 30, 2019. One million (1 x 106) bands were sold to Fitbit in 2018. Your company will invest $19 million in 2019 Year O) to build the Charge 4 fabrication plant. No loan is needed. Start-up will be in early 2020. The project life will be set at 4 years and MARR is firm at 20%. There is risk in this proposal in two variables, from your marketing department's study. a) The usual cost to manufacture and deliver would be about $14 per wristband if there were no defect in the rubber-like material or the processing. From this past year's data, mean cost per band is u = $14.50 with standard deviation, o = $0.80 b) Fitbit will not guarantee a number of wristbands it will buy from you each year. Fitbit has agreed to buy exclusively from your company, but will only buy as many Charge 4 bands as they sell to the public. From sales data for similar products, here are estimates of the sales: Items sold per year relative frequency 600,000 0.06 700,000 800,000 0.20 900,000 1,000,000 1,100,000 a) Calculate the expected number of bands that will sell each year based on the past sales data given above. 0.12 0.30 0.25 0.07 Now simulate the economics of this project on a before-tax basis. You will use the Monte Carlo sampling/simulation technique and generate random deviates and/or random numbers as needed based on the type of variable and distribution. b) Using a selling price of $23/band, calculate the cash flow before taxes (CFBT) and the present worth of CFBT for 100 simulations. Sum up all the PW values and report whether you recommend approval or rejection of the project