5. Flextire Manufacturing is considering two mutually exclusive proposals. Each will cost $80,000 and wi last 6 years. Cash flows and estimated probabilities are presented below. Based on an MARR of 10%, use decision tree analysis to determine which proposal Flextire should consider. Proposal A Proposal B Probability Benefits per year Benefits per year $18,000 Probability Conservative= 0.40 Conservative=0.25 $17,500 20,000 Most likely= 0.60 20,500 Most likely= 0.35 23.000 Optimistic= 0.15 23.000 Optimistic= 0.25
5. Flextire Manufacturing is considering two mutually exclusive proposals. Each will cost $80,000 and wi last 6 years. Cash flows and estimated probabilities are presented below. Based on an MARR of 10%, use decision tree analysis to determine which proposal Flextire should consider. Proposal A Proposal B Probability Benefits per year Benefits per year $18,000 Probability Conservative= 0.40 Conservative=0.25 $17,500 20,000 Most likely= 0.60 20,500 Most likely= 0.35 23.000 Optimistic= 0.15 23.000 Optimistic= 0.25
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:5. Flextire Manufacturing is considering two mutually exclusive proposals. Each will cost $80,000 and will
last 6 years. Cash flows and estimated probabilities are presented below. Based on an MARR of 10%,
use decision tree analysis to determine which proposal Flextire should consider.
Proposal A
Proposal B
Benefits per year
Probability
Benefits per year
Probability
Conservative= 0.40
$18,000
Conservative=0.25
$17,500
20,000
Most likely= 0.60
20,500
Most likely= 0.35
23,000
Optimistic = 0.15
23,000
Optimistic 0.25
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