A project has a life of 10 years and no salvage value. Your firm uses an MARR of 8% to evaluate projects. The project has uncertain costs and revenue as shown in the table below: Initial Cost Probability Net Revenue Probability $120,000 0.25 $33,000 0.15 $240,000 0.60 $44,000 0.55 $300,000 0.15 $52,000 0.30 Determine the EUAW for the combination of inital cost and revenue with the highest probability of occurence. Express your answer in $ to the nearest $100.
A project has a life of 10 years and no salvage value. Your firm uses an MARR of 8% to evaluate projects. The project has uncertain costs and revenue as shown in the table below: Initial Cost Probability Net Revenue Probability $120,000 0.25 $33,000 0.15 $240,000 0.60 $44,000 0.55 $300,000 0.15 $52,000 0.30 Determine the EUAW for the combination of inital cost and revenue with the highest probability of occurence. Express your answer in $ to the nearest $100.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 2E
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Question
A project has a life of 10 years and no salvage value. Your firm uses an MARR of 8% to evaluate projects. The project has uncertain costs and revenue as shown in the table below:
Initial Cost | Probability | Net Revenue | Probability | |
$120,000 | 0.25 | $33,000 | 0.15 | |
$240,000 | 0.60 | $44,000 | 0.55 | |
$300,000 | 0.15 | $52,000 | 0.30 |
Determine the EUAW for the combination of inital cost and revenue with the highest probability of occurence. Express your answer in $ to the nearest $100.
Answer is 8233.0
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