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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 $44,000 0.55 $330,000 0.15 $54,000 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 $44,000 0.55 $330,000 0.15 $54,000 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.

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
Problem 3MC
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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 $44,000 0.55 $330,000 0.15 $54,000 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.
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 $44,000 0.55 $330,000 0.15 $54,000 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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