Purchase Solution

Simulation of demand

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As the owner of a rent-a-car agency you have determined the following statistics:

Potential Rentals Daily Probability Rental Duration Probability
0 .10 1 day .50
1 .15 2 days .30
2 .20 3 days .15
3 .30 4 days .05
4 .25

The gross profit is \$40 per car per day rented. When there is demand for a car when none is available there is a goodwill loss of \$80 and the rental is lost. Each day a car is unused costs you \$5 per car. Your firm initially has 4 cars.

a. Conduct a 10-day simulation of this business using Row #1 below for demand and Row #2 below for rental length.

Row #1:
.257 .887 .037 .661 .036 .173 .634 .818 .932 .069

Row #2:
.446 .465 .069 .457 .283 .525 .064 .503 .373 .751

b. You find out that your firm can obtain another car for \$200 for 10 days. Should you take the extra car?

Please help setting up random number and vlookup as well as a detailed solution to the above questions.

Please see the attached file for a complete description of the problem.

Solution Summary

The solution answers questions based on the simulation of demand for a car rental agency.

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