Calculate the expected value of the construction cost

Reference no: EM132165042

Question: For the data in Problem below calculate the expected value of the equivalent annual construction cost per mile.

Problem: A road between Fairbanks and Nome, Alaska, will have a most likely construction cost of $4 million per mile. Doubling this cost is considered to have a probability of 30%, and cutting it by 25% is considered to have a probability of 10%. The state's interest rate is 8%, and the road should last 40 years. What is the probability distribution of the equivalent annual construction cost per mile?

Reference no: EM132165042

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