A project has a life of 10 years and no salvage value. Your firm uses an MARR of 8% to evaluate projects. The project has uncertain costs and revenue as shown in the table below: Net Initial Cost Probability Probability Revenue $110,000 0.25 $30,000 0.15 $240,000 0.60 $41,000 0.55 $320,000 0.15 $53,000 0.30 Determine the risk for the project expressed as the standard deviation of the expected value of the EUAW. Express your answer in $ to the nearest $100.
A project has a life of 10 years and no salvage value. Your firm uses an MARR of 8% to evaluate projects. The project has uncertain costs and revenue as shown in the table below: Net Initial Cost Probability Probability Revenue $110,000 0.25 $30,000 0.15 $240,000 0.60 $41,000 0.55 $320,000 0.15 $53,000 0.30 Determine the risk for the project expressed as the standard deviation of the expected value of the EUAW. Express your answer in $ to the nearest $100.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:A project has a life of 10 years and no salvage value. Your firm uses an MARR of 8% to
evaluate projects. The project has uncertain costs and revenue as shown in the table below:
Net
Initial Cost Probability
Probability
Revenue
$110,000 0.25
$30,000
0.15
$240,000 0.60
$41,000
0.55
$320,000 0.15
$53,000
0.30
Determine the risk for the project expressed as the standard deviation of the expected value
of the EUAW. Express your answer in $ to the nearest $100.
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