Compute the expected value for the life

Reference no: EM132165049

Question: For the data in Problem, assume that the optimistic probability is 15%, the most likely is 80%, and the pessimistic is 5%.

(a) What is the expected value of the rate of return?

(b) Compute the expected value for the life, and the corresponding rate of return.

Problem: A heat exchanger is being installed as part of a plant modernization program. It costs $80,000, including installation, and is expected to reduce the overall plant fuel cost by $20,000 per year. Estimates of the useful life of the heat exchanger range from an optimistic 12 years to a pessimistic 4 years. The most likely value is 5 years. Assume the heat exchanger has no salvage value at the end of its useful life.

(a) Determine the pessimistic, most likely, and optimistic rates of return.

(b) Use the range of estimates to compute the mean life and determine the estimated before-tax rate of return.

Reference no: EM132165049

Questions Cloud

What roles would need to be filled for the business : How would you assess the strengths and skills of each employee in order to assign the specific roles and responsibilities?

Where is the formula after you prepare the chart : Cost Shifing: where is the formula after you prepare the chart? Please look at the example created by the textbook author.

What is the expected value of the present worth : For the data in Problem below, assume that the optimistic probability is 20%, the most likely is 50%, and the pessimistic is 30%.

Calculate the budget profit or loss for the quarter : FNSACC501 Provide financial and business performance information - Find most expensive international and also Australian shares in the market

Compute the expected value for the life : For the data in Problem, assume that the optimistic probability is 15%, the most likely is 80%, and the pessimistic is 5%. What is the expected value of the.

Evaluate new business opportunities in Australia : CSM80001 Final Assignment - The CEO has instructed you to prepare a detailed report to evaluate new business opportunities for contracts in Australia

Find expected value of the equivalent uniform annual cost : For the data , assume that the optimistic probability is 20%, the most likely is 50%, and the pessimistic is 30%. What is the expected value of the equivalent.

Describe any notable microeconomic relationships : In the workplace we are often asked to create "briefs". A brief provides a snapshot, or short, written summary, of a situation or event that has occurred.

How much money the man is expected to win or lose : A man went to Atlantic City with $500 and placed 100 bets of $5 each, one after another, on the same number on the roulette wheel.

User Account

All Pages