Monte Carlo

 

 

Your company is conducting a risk assessment on the construction of an oil pipeline
project. If you build the pipeline, you will receive a total of between $200 million to
$400 million in royalties over the 20-year life of the pipeline. Unfortunately, there is a
risk of a rupture, and if the pipeline ruptures, your company will be liable for $800
million in damages. The probability of a rupture is low, however, at a level of
Prupture = 0.03. If there is a rupture, there is a 0.25 probability that political pressure
from the state in which the rupture occurs and unwelcome attention from the US
Congress and federal regulators will cause the total losses to the company to
quadruple to $3.2 billion.
Assume the income level from royalties is distributed uniformly. Use discrete
variables to represent the occurrence of a rupture and the likelihood of government
intervention.
What is the expected value (average outcome) of this pipeline project to your
company? Out of 10,000 trials, how often will your company experience a loss on
this project?

Sample Solution

uch as them being discharged to test their obdurate behavior towards the participants. The psychiatrists were not able to reliably distinguish normal people from those with an illness. A diagnostic method that makes any such errors cannot be considered valid or reliable. Collaboration was used greatly in this study as all eight participants worked together throughout the experiment. Without collaboration, this experiment would not have been completed accurately and properly as each and every step requires meticulous thinking. Also, the group was needed to gain proper admittance into the psychiatric ward for this rare situation. The production of knowledge in this study in the human sciences was a collaborative task and not solely the product of an individual.

The natural sciences is another area of knowledge in which production of knowledge can be seen as a collaborative task. The natural sciences is a branch of science that relates directly to the physical world including subjects such as physics, biology, chemistry, geology, and more. Research studies that show collaboration with production of knowledge are also conducted in this field. A biological study was conducted at Johns Hopkins School of Medicine about colorectal cancer. Dr. Subroto B. Chatterjee worked with colleagues to identify a protein, beta-1,4-galactosyltransferase-V, involved in the proliferation, rapid increase, of cells and development of new blood vessels could serve as biomarkers for early detection of colorectal cancer. The protein increased greatly in colorectal cancer tumor cells in comparison to normal human tissue. For further collaboration, he assigned groups of researchers to the same area of study to have multiple trials and perspectives on results. After observation of growth and an increase in activity, Dr. Chatterjee and other scientists began testing by inhibiting the protein and finding that the byproducts halted colorectal cancer cell proliferation. To conduct further research, Chatterjee collaborated with students and scientists from Johns Hopkins; they found elevated gene expressions in relation to colorectal cancer. They also used a previous study from 2013 in order to supplement their current research. This previous study was from Chatterjee’s previous group to show daily treatment with an inhibitor showing a reduction in the protein beta-1,4-galactosyltransferase-V. With this research, there was sufficient evidence to demonstrate blockage of the cycle of cell proliferation. Further collaboration between Dr. Chatterjee, Dr. Hou, Dr. Bandaru, Dr. Mannan and Dr. Sharma from Johns Hopkins School of Medicine and Dr. Pezhouh from Northwestern University’s Feinberg School of Medicine was shown in the publication of the study. Without the collaboration of the scientists, this study would not have been completed as there are many steps and complications throughout the experiment. There was also the collaboration of information from multiple groups in order to reach a conclusion. The publication had many authors as well. Because so many people worked together in order to produce this knowledge, it can be said that knowledge production

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