12. A company has a possible project and has identified the two major areas of risk as being the inflation and the movement in world oil prices. It has calculated various possible NPVs as follows: Oil price change Decrease Unchanged Increase Demand Probability 0.1 0.3 0.6 Low 0.2 £2m £1m -£4m Medium 0.3 £3m £2m -£1m High 0.5 £6m £5m £2m What is the probability that the project will have an NPV of exactly £2m? A) 0.36 B) 0.39 C) 0.41 D) 0.64

12. A company has a possible project and has identified the two major areas of risk as being the inflation and the movement in world oil prices. It has calculated various possible NPVs as follows: Oil price change Decrease Unchanged Increase Demand Probability 0.1 0.3 0.6 Low 0.2 £2m £1m -£4m Medium 0.3 £3m £2m -£1m High 0.5 £6m £5m £2m What is the probability that the project will have an NPV of exactly £2m? A) 0.36 B) 0.39 C) 0.41 D) 0.64

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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2. Statistical measures of stand-alone risk Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during a possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: Ethan owns a two-stock portfolio that invests in Happy Dog Soap Company (HDS) and Black Sheep Broadcasting (BSB). Three- quarters of Ethan's portfolio value consists of HDS's shares, and the balance consists of BSB's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Happy Dog Soap Black Sheep Broadcasting Strong 0.50 50% 70% Normal 0.25 30% 40% Weak…
S5.1. The demand for a product of a company varies greatly from month to month. The probability distribution for the company’s monthly demand, based on the past two years of data, is given:Demand: 250 375 425 575Probability: 0.20 0.35 0.40 0.05.a) What is the expected value of the monthly demand?b) If each unit costs $40 and generates $60 in revenue, how much will the company gain or lose in a month if its production level is based on your answer to a) and the actual demand for the item is 250?
An actuary is analyzing the lapse experience of his company's whole life product. The tabulated results are as follows: Age group % of whole life policyholders probability of lapsing 8 % < 20 5 % 20 – 29 13 % 5 % 30 – 39 21 % 4 % 40 – 49 29 % 4 % 50 – 59 17 % 3 % 60 + 12 % 2 % Since the age group 40-49 is the most profitable, what is the probability that a lapsed policy will belong to this cohort?
The principle of redundancy is used when system reliability is improved through redundant or backup components. Assume that a student's alarm clock has a 14.9% daily failure rate. Complete parts (a) through (d) below. a. What is the probability that the student's alarm clock will not work on the morning of an important final exam? (Round to three decimal places as needed.)
6. For an insurance coverage, claim counts follow a binomial distribution with m = 4. q varies by insured with the following probabilities: 0.1 0.2 0.3 Probability 0.5 0.25 0.25 An insured submits 0 claims in the first year and 3 claims in the second year. Calculate the predictive probability of the same insured submitting 0 claims in the third year.
1.) Probability Concepts ● A sales manager estimates that the mean expected sales volume of a proposed new product for the following year is 900,000 units, standard deviation of 450,000 units and with the following financial data below: Selling price Variable cost/unit Fixed Cost/vear - P 8.00 - P 5.00 - P1,800,000.00 Calculate the ff.: a) Break even point for the new product; b) The probability of at most break-even point; c) The probability that the profits from the new product would be at most P 500,000.00; d) The probability that the new product would cause us to lose of P 300,000.00 or less.
Buzz Salon has one hair stylist. Customers have an arrival rate of 2.4 customers per hour, and haircuts are given with a service rate of 5.1 per hour. Use the Poisson arrivals and exponential service times model to answer the following questions. (Round your answers to four decimal places.) (a) What is the probability that no units are in the system?
Suppose that the price of a share of a particular stock listed on the New York Stock Exchange is currently $39. The following probability distribution shows how the price per share is expected to change over a three-month period: Stock Price Change Probability -2 0.05 -2 0.10 0 0.25 1 0.20 2 0.20 3 0.10 4 0.10 a. Construct a spreadsheet simulation model that computes the value of the stock price in 3 months by simulating the price change 100 times. b. For a current price of $39 per share, what is the average stock price per share 3 months from now based on your simulation?
Hoping to diversify suppliers, a manufacturer buys the same component from three sources, with 24% of the components from vendor A, 39% from vendor B, and 37% from vendor C. Based on past experience, the manufacturer expects that vendors A, B, and C will produce defective components at a rate of 1.5%, 1.2%, and 1.8%, respectively. What is the expected proportion of defective components in the manufacturer’s stock?
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25. Under what circumstances would the following assumptions not be accurate? a. The assumption that the probability law describing the number of periods until the process goes out of control follows the geometric distribution. b. The assumption that an out-of-control condition corresponds to a shift of the mean equal to Sơ. c. The assumption that the search cost is a fixed constant, a2.

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	Oil price change	Decrease	Unchanged	Increase
Demand	Probability	0.1	0.3	0.6
Low	0.2	£2m	£1m	-£4m
Medium	0.3	£3m	£2m	-£1m
High	0.5	£6m	£5m	£2m