14. Pongky Company's managers are attempting to value a piece of land that they own. One potential occurrence is that the old road that borders the land gets paved. Another possibility is that the road does not get paved. A third outcome is that the road might be destroyed and completely replaced by a new road. Based on the following future states of nature, their probabilities, and subsequent values of the land, what is the expected value of the land? Probability 0.5 Future States of Nature (SN) SN 1: Current road gets paved SN 2: Road does not get paved SN 3: Current road destroyed and replaced with new road 0.4 0.1 Estimates of land value under each possible future state of nature: Value if SN 1: P200,000 Value if SN 2: P100,000 Value if SN 3: P550,000 P133,333 b. P195,000 a. P225,000 d. P283,333 с.
14. Pongky Company's managers are attempting to value a piece of land that they own. One potential occurrence is that the old road that borders the land gets paved. Another possibility is that the road does not get paved. A third outcome is that the road might be destroyed and completely replaced by a new road. Based on the following future states of nature, their probabilities, and subsequent values of the land, what is the expected value of the land? Probability 0.5 Future States of Nature (SN) SN 1: Current road gets paved SN 2: Road does not get paved SN 3: Current road destroyed and replaced with new road 0.4 0.1 Estimates of land value under each possible future state of nature: Value if SN 1: P200,000 Value if SN 2: P100,000 Value if SN 3: P550,000 P133,333 b. P195,000 a. P225,000 d. P283,333 с.
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
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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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Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
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Transcribed Image Text:14. Pongky Company's managers are attempting to value a piece of land
that they own. One potential occurrence is that the old road that borders
the land gets paved. Another possibility is that the road does not get
paved. A third outcome is that the road might be destroyed and
completely replaced by a new road. Based on the following future states
of nature, their probabilities, and subsequent values of the land, what is
the expected value of the land?
Probability
0.5
Future States of Nature (SN)
SN 1: Current road gets paved
SN 2: Road does not get paved
SN 3: Current road destroyed and replaced
with new road
0.4
0.1
Estimates of land value under each possible future state of nature:
Value if SN 1: P200,000
Value if SN 2: P100,000
Value if SN 3: P550,000
P133,333
b. P195,000
a.
P225,000
d. P283,333
с.
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