Answered: A decision tree of a project is given…

A decision tree of a project is given as follows: A1 S8 What is the expected value of alternative B? 0.5 O a. 5.0 O b. $5.2 EMV-7.5 A2 0.5 O. SO -$15 Od. $4.5 .73 $4 0.45 s10 B 0.55 so

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Assume that we can estimate a project's cash flows as follows: n 0 1 2 3 4 5 Expected Flow E(An) Estimate of Standard Deviation on $0 $10 $15 $20 $25 $30 -$300 $120 $150 $150 $110 $100 In this case, each annual flow can be represented by a random variable with known mean and variance. Further assume complete independence among the cash flows. (a) Find the expected NPW and the variance of this project at i = 10%. (b) If all cash flows are normally distributed with the given means and variances, what is the probability that the NPW will exceed $200?
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Time left 1:14:17 What is the Future worth of the following cashflows: First Cost = 52,000$, AOC = 4,000$, Salvage value = 12,000$, n = 13 and i= 14%. O a. -73,185$ O b. -12,527$ O c. 49,606$ O d. -401,960$ Recovery period is the remaining interval of time in the life of the asset in years. Select one: a. True O b. False
E2
The proposed projects have the potential uniform annual benefits and associated probability at occurrence shown below. Which project is more desirable based on these Probability data? EUAB $1,000 2,000 3,000 4,000 Project B Probability EUAB Probability 0.10 $1,500 0.20 0.30 2,500 0.40 0.40 3,500 0.30 0.20 4,500 0.10 Project A
Problem 2 Archibald Architecture and Erin's Engineers are two firms that are working together to build a new li- brary for the local community. They must each contribute some amount of resources to the build: Archibald will contribute a units of resources at a cost of a², and Erin will contribute e units at a cost of 2e². The final value of the build is 10(a + e -ae), which Archibald and Erin split equally, so that each receives a revenue of 5(a + e - ae). (a) Write down Archibald and Erin's payoff functions. (b) Suppose that the only resource contribution options available are 0,1 and 2. Archibald and Erin must make their decisions simultaneously without consulting one another. i. Compute the payoffs that correspond to w, x, y and z in the matrix below. Erin 1 5,3 Archibald 0 1 2 0 0, w 4,5 4,3 6,10 y, 3 2 10, x 4, -3 2,-8 ii. Is (0,0) is a Nash equilibrium in this game? Justify your assertion in no more than 25 words. iii. Is a resource contribution level of 2 rationalisable for…
Question 22 A decision tree of a project is given as follows: What is the expected value of alternative A? A1 O a, $5.08 O b. S8.83 0.5 .27 EMV-7.5 A2 O. $4.98 0.5 O d. $5.91 $15 A .73 $4 0.45 $10 B 0.55 so
A company is planning to raise savings with associated probabilities shown in the table below. The useful life is 5 years with a probability of 0.6 and 3 years with probability of 0.4. Use a MARR of 10% 1. Determine the joint probability distribution for savings per year and useful life. 2. Determine the Expected Value of NPW i an initial Cost of $50,000 is required. Annual Benefit $15.000 Probability 0.25 $20,000 0.45 $25,000 0.3