Give the joint probability distribution for savings

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Modifying an assembly line has a first cost of $80,000, and its salvage value is $0. The firm's interest rate is 9%. The savings shown in the table depend on whether the assembly line runs one, two, or three shifts, and on whether the product is made for 3 or 5 years.

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(a) Give the joint probability distribution for savings per year and the useful life.

(b) Define optimistic, most likely, and pessimistic scenarios by using both optimistic, both most likely, and both pessimistic estimates. Use a life of 4 years as the most likely value. What is the present worth for each scenario?

Reference no: EM131809587

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