Research Methods for Business

ASB
4601
–
4801
–
4101
–
4851
:
Research Methods
Instructor: Prof K. Nikolopoulos, Dr. Eng., ITP, P
2
P
Assignment
Deadline
:
2
7
/
11
/
201
4
at
1
6
.00
(
Weight: 4
0% of module mark
)
Submit
BOTH
hard
–
copy and soft
–
copy(Blackboard)
Real Case study
:
Decision
s
in
USASuperCars
Scenario
:
USAS
uperCars
sells luxury sports cars. It has just signed
a contract to sell,
in a years’ time
,
a batch of these cars to various customers around the globe. The following table shows the orders of
seven
customers. The selling prices are fixed and in local curr
encies at the exchange rate prevailing
at the time of the delivery. Of course there is uncertainty in the exchange rates, and
in order to cope
with this uncertainty
estimates as well as standard deviation of these have been provided by the
Bank of America.
The report that came with these estimates stated that these rates are normally
distributed and independent.
Worldwide Orders
Exchange Rate
(to $)
Customer
Quantity
Selling Price
Mean
Standard
Deviation
UK
12
£ 57,
5
00
$ 1.4
MM
/£
$ 0.041/£
Japan
1
5
Y 8,
4
00,000
$0.009
DD
/Y
$0.00045/Y
Japan
2
3
Y 9,000,000
$0.009
DD
/Y
$0.00045/Y
Canada
1
1
CAD
97,
0
00
$0.824
YY
/
CAD
$0.0342/
CAD
Canada
2
3
CAD
100
,000
$0.824
YY
/
CAD
$0.0342/
CAD
South Africa
2
R 4,
100
,000
$.0.
0
211/R
$.0.00083/R
USA
1
$100,000
DD
/
MM
/
YY
Is you
r Date of Birth
Questions
:
1)
Find the distribution and report the mean and the standard deviation of the
total
revenue in $
2)
a)
What is the probability that this revenue will exceed $ 2,2
0
0,000?
b)
What is the probability that thi
s revenue will exceed $ 2,
2
25
,000?
3)
a)
What is the probability that this revenue will be less than $ 2,1
6
0,000?
b) What is the probability that this revenue will be less than $ 2,1
3
0,000?
4)
HSBC offers to pay a sure sum of
$
2,150,000 in return for the revenue
in local currencies.
What do you think
,
is this a good offer
for
USASuperCars
or not?
5)
In
USASuperCars
,
the Sales manager is willing to accept HSBC’s offer, but the CEO is not.
Who is more risk
–
averse?
6)
W
hat other risks the bank is taking apart from the u
ncertainty in the exchange rates?
7)
If the offer
is
to pay the sure sum in three months’ time
rather
than
in
twelve
months’ time
,
would that make any difference? When would the bank and when the company would
prefer the payment to be made, and why?
8)
USASuper
Cars
has accepted HSBC’s offer. Now consider the bank’s risk, assuming the bank
will convert all currencies into US dollars at the prevailing exchange rates. What is the
probability that the bank will incur a loss?
9)
The bank defines its Value
–
at
–
Risk as th
e loss that occurs at the 5
th
percentile of the
uncertain revenue (5% left tail of the distribution). What is the bank’s Value
–
at
–
Risk and
what is the bank’s expected profit?
10)
What other options does the bank has if they decide not to convert all/some of t
he
currencies in
twelve
months’ time
?
Marking scheme:
50
% of the mark comes from the aforementioned
ten
questions
(5% for each)
, and
50
%
from
the overall presentation of the ‘business
’
report.
A ‘business’ report must have a nice cover, a good executive s
ummary,
an introduction and
a main
body that reads through smoothly and uses ‘lay terms’, not using statistical
jargon
and be printed
,
bound
and formatted
with
the highest possible quality.
It mu
st contain a lot of graphs an
d
as much
‘colo
u
r’ as possible
. No assumptions should be made
on
the academic background and experience of
the potential readership.
References should be
used carefully and the majority coming from
practitioner
/business
sources (www
, the press, etc
)
and any technical details /analysis
should be in
an appendix.
Overall the main bo
dy should not be more than 2500.
Best of Luck
,
Kostas

29