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2. A project has a life of 10 years, and no salvage value. The firm uses an interest rate of 12% to evaluate engineering projects. The project has an uncertain first cost and net revenue. What is the joint probability distribution for first cost and net revenue? Probability 0.2 First Cost $300,000 $400,000 0.5 $600,000 0.3 Net Revenue $70,000 Probability 0.3 $90,000 0.5 $100,000 0.2

2. A project has a life of 10 years, and no salvage value. The firm uses an interest rate of 12% to evaluate engineering projects. The project has an uncertain first cost and net revenue. What is the joint probability distribution for first cost and net revenue? Probability 0.2 First Cost $300,000 $400,000 0.5 $600,000 0.3 Net Revenue $70,000 Probability 0.3 $90,000 0.5 $100,000 0.2

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter20: The Problem Of Adverse Selection Moral Hazard
Section: Chapter Questions
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Engineering Econ HW8 Q2

2. A project has a life of 10 years, and no salvage value. The firm uses an interest rate of 12% to evaluate engineering projects. The project has an uncertain first cost and net revenue. What is the joint probability distribution for first cost and net revenue? Probability 0.2 First Cost $300,000 $400,000 0.5 $600,000 0.3 Net Revenue $70,000 Probability 0.3 $90,000 0.5 $100,000 0.2
Transcribed Image Text:2. A project has a life of 10 years, and no salvage value. The firm uses an interest rate of 12% to evaluate engineering projects. The project has an uncertain first cost and net revenue. What is the joint probability distribution for first cost and net revenue? Probability 0.2 First Cost $300,000 $400,000 0.5 $600,000 0.3 Net Revenue $70,000 Probability 0.3 $90,000 0.5 $100,000 0.2
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