What is the expected value of the present worth

Assignment Help Microeconomics
Reference no: EM132165051

Question: For the data in Problem below, assume that the optimistic probability is 20%, the most likely is 50%, and the pessimistic is 30%.

(a) What is the expected value of the present worth?

(b) Compute the expected value for annual savings, and the corresponding present worth.

(c) Do the answers to (a) and (b) match? Why or why not?

Problem: A new engineer is evaluating whether to use a higher-voltage transmission line. It will cost $250,000 more initially, but it will reduce transmission losses. The optimistic, most likely, and pessimistic projections for annual savings are $20,000, $15,000, and $8,000. The interest rate is 6%, and the transmission line should have a life of 30 years.

(a) What is the present worth for each estimated value?

(b) Use the range of estimates to compute the mean annual savings, and then determine the present worth.

(c) Does the answer to (b) match the present worth for the most likely value? Why or why not?

Reference no: EM132165051

Questions Cloud

What is the pw for each estimated value : A new engineer is evaluating whether to use a larger-diameter pipe for a water line. It will cost $350,000 more initially, but it will reduce pumping costs.
Construct probability distributions for sale and unit profit : Should the project in Problem below be undertaken if the firm uses an expected value of present worth to evaluate engineering projects?
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.

Reviews

Write a Review

Microeconomics Questions & Answers

  The free rider problem

Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

  Failure of the super committee is good thing for economy

Some commentators have argued that the failure of the “Super committee” is good thing for the economy?  Do you agree?

  Case study analysis about optimum resource allocation

Case study analysis about optimum resource allocation: -  Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

  Fixed cost and vairiable cost

Questions:  :   Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

  Problem - total cost, average cost, marginal cost

Problem - Total Cost, Average Cost, Marginal Cost: -  Complete the following table of costs for a firm.  (Note: enter the figures in the  MC   column  between  outputs of  0 and 1, 1 and 2, 2 and 3, etc.)

  Oligopoly and demand curve problem

Problem based on Oligopoly and demand curve,  Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?

  Impact of external costs on resource allocation

Explain the impact of external costs and external benefits on resource allocation;  Why are public goods not produced in sufficient quantities by private markets?  Which of the following are examples of public goods (or services)? Delete the incorrec..

  Shifts in demand and movements along the demand curve

Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..

  Article review question

Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

  Long-term growth, international trade & globalization

Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..

  European monetary union (emu) in crisis

"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"

  Development game “settlers of catan”

Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd