A firm is considering employing one of the two machines A and B over a period of 4 years at the end of which the salvage value of each is zero. The cost of machine A is K10, 000 while that of machine B is K11, 000. The probability distributions of the returns for each machine are given in the table below;. Probability Machine A (K) Machine B (K) 0.25 6000 7000 0.50 5000 5000 0.25 4000 3000 The risk free discount rate is 10% while the risk premium applied is as follows; Standard deviation (K) Risk Premium 0-999 0% 1000-1999 10% 2000-2999 10% 3000-3999 20% Required: Which of the two machines should be installed?

A firm is considering employing one of the two machines A and B over a period of 4 years at the end of which the salvage value of each is zero. The cost of machine A is K10, 000 while that of machine B is K11, 000. The probability distributions of the returns for each machine are given in the table below;. Probability Machine A (K) Machine B (K) 0.25 6000 7000 0.50 5000 5000 0.25 4000 3000 The risk free discount rate is 10% while the risk premium applied is as follows; Standard deviation (K) Risk Premium 0-999 0% 1000-1999 10% 2000-2999 10% 3000-3999 20% Required: Which of the two machines should be installed?

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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