Appshop Case Analysis

Topics: Monte Carlo, Alternative, Monte Carlo methods in finance Pages: 4 (1395 words) Published: January 20, 2012
Cover Letter
The Appshop Inc case is based on the evaluation of the various alternatives available for the company while charging its client for execution of a project. Mr. Clark, Director, Central Region Appshop Inc had to make a decision on either accepting any one of the prices suggested by the client or participate in the bidding process. The case involves using Monte Carlo Simulation and Triangle Distribution to figure out the best possible option for Appshop Inc. Executive Summary

Appshop Inc was a privately held, independent full-service Oracle consulting, applications and outsourcing company with revenues of $ 25 million. Mr. Eric Clark, Director, Central Region Appshop Inc was responsible for growing the company’s client base, selling additional services and supporting the existing client base. Mr. Clark had recently concluded a successful implementation of Oracle financial for one of its clients Dallas office. The client pleased with Appshop’s performance had requested Mr. Clark to implement the similar application across the company’s (client) offices across the globe and come out with a project cost for this implementation. Mr. Clark with his team of consultants outlined the scope, plan and the timeline for implementation of the project for the client. Appshop would have to put in 1000 hours of work per month for the next 24 months, which would cost Appshop $ 140 per hour. Based on these findings, Mr. Clark proposed $ 175,000 per month for 24 months for implementing the entire project. However, the client requested Appshop to lower the prices and gave two alternative prices. Appshop could either accept $ 155,000 per month for 24 months or $ 125,000 per month for 24 months along with a bonus of $1.5 million post satisfying certain criteria, the probability of which was 0.7. In case, Appshop did not accept the two alternate prices suggested by the client, then the client would go for a bidding process. The company winning the bid would receive the...
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