10- For the data in Problem 10-16: 38 A 16 10-A robot has just been installed at a cost of $81,000. It will have no salvage value at the end of its useful life. Savings per Year Probability Useful Life (years) Probability $18,000 12 1/6 20,000 S 2/3 22,000 4 1/6 (a) What is the joint probability distribution for savings per year and useful life? (b) Define optimistic, most likely, and pessimistic scenarios by using both optimistic, both most likely, and both pessimistic estimates. What is the rate of return for each scenario? (a) What are the expected savings per year, life, and corresponding rate of return for the expected values? (b) Compute the rate of return for each combination of savings per year and life. What is the expected rate of return? (c) Do the answers for (a) and (b) match? Why or why not? A 0.2 0.7 0.1
10- For the data in Problem 10-16: 38 A 16 10-A robot has just been installed at a cost of $81,000. It will have no salvage value at the end of its useful life. Savings per Year Probability Useful Life (years) Probability $18,000 12 1/6 20,000 S 2/3 22,000 4 1/6 (a) What is the joint probability distribution for savings per year and useful life? (b) Define optimistic, most likely, and pessimistic scenarios by using both optimistic, both most likely, and both pessimistic estimates. What is the rate of return for each scenario? (a) What are the expected savings per year, life, and corresponding rate of return for the expected values? (b) Compute the rate of return for each combination of savings per year and life. What is the expected rate of return? (c) Do the answers for (a) and (b) match? Why or why not? A 0.2 0.7 0.1
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Solve 10.38 using excel and use IRR to find the rate of return . Please show the steps clearly
Transcribed Image Text:For the data in Problem 10-16:
10-38
(a) What are the expected savings per year, life, and corresponding rate of return for the expected values?
(b) Compute the rate of return for each combination of savings per year and life. What is the expected rate of return?
(c) Do the answers for (a) and (b) match? Why or why not?
10-16
A robot has just been installed at a cost of $81,000. It will have no salvage value at the end of its useful life.
Savings per Year | Probability | Useful Life (years) | Probability
--- | --- | --- | ---
$18,000 | 0.2 | 12 | 1/6
20,000 | 0.7 | 5 | 2/3
22,000 | 0.1 | 1 | 1/6
(a) What is the joint probability distribution for savings per year and useful life?
(b) Define optimistic, most likely, and pessimistic scenarios by using both optimistic, both most likely, and both pessimistic estimates. What is the rate of return for each scenario?
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