What is the expected value of the project

Assignment Help Business Economics

Reference no: EM131164572

Ms. Lee Ding is considering whether the following capitol project should be undertaken. Its life is 6 years; it has a 6% salvage value; and her firm uses a 12% MARR.

Initial Cost P* Annual Net Revenue P*

$250,000 0.4 $ 75,000 0.2

300,000 80,000

350,000 0.2 90,000 0.2

400,000 .05 100,000 0.1

500,000 .05 115,000 0.1

*Probability

a) What is the probability of it costing $300,000?

b) What is the probability of the net revenue being $80,000?

c) What is the expected value of the project?

d) Should she do it?

Reference no: EM131164572

Questions Cloud

Describe how monopsony power and presuming it is present : The labor market for nurses though cyclical often has been characterized by prolonged periods of apparent shortages. One potential explanation for the phenomenon is the monopsony power of hospitals as employers of nurses. Describe how monopsony power..

Determine the internal rate of an investment : Determine the internal rate of an investment in a $250,000 piece of machinery depreciated over a 5 year service life with no salvage value. The project horizon is 6 years. Annual revenue is $75,000 and annual operating expenses are $10,000. What’s a...

Strong link between changes in money supply and inflation : The Taylor rule links the Federal Reserve's target for the. Expansionary monetary policy refers to the ________ to increase real GDP. Which of the following best describes how banks create money? There is a strong link between changes in the money su..

Practical use of optimization models and linear programming : In a couple of paragraphs describe the practical use of optimization models and linear programming. Where do you think it is best applied? What industries would be beneficial to use optimization models?

What is the expected value of the project : Ms. Lee Ding is considering whether the following capitol project should be undertaken. Its life is 6 years; it has a 6% salvage value; and her firm uses a 12% MARR. What is the probability of it costing $300,000? What is the probability of the net r..

Possibility frontier exhibiting increasing opportunity cost : Cattletown steakhouse is a restaurant known for its steak meal and hamburger basket. Draw a graph showing a production possibility frontier exhibiting increasing opportunity costs.

Monetarism’s view of fiscal policy : Monetarism’s view of fiscal policy is: Monetarism’s view of income distribution and governmental inefficiency would lead the reader to conclude that: Monetarism’s view of monopoly leads the reader to conclude that he believes: Friedman’s view of soc..

Firm that is operating at loss has two options : In the short run, a firm that is operating at a loss has two options.

Derive equation for slope of utilities possibilities curve : Norton and Ralph have a utility possibility frontier that is given by the following equation, UR + (UN)^2 = 100. Plot the utilities possibilities frontier on a graph with UR on the vertical axis and UN on the horizontal axis. Derive an equation for t..

User Account

All Pages