A road between Fairbanks and Nome, Alaska, will have a most likely construction cost of $7 million per mile. Doubling this cost is considered to have a probability of 30%, and cutting it by 25% is considered to have a probability of 10%. The state’s interest rate is 4%, and the road should last 25 years before major reconstruction. What is the probability distribution of the equivalent annual construction cost per mile?

A road between Fairbanks and Nome, Alaska, will have a most likely construction cost of $7 million per mile. Doubling this cost is considered to have a probability of 30%, and cutting it by 25% is considered to have a probability of 10%. The state’s interest rate is 4%, and the road should last 25 years before major reconstruction. What is the probability distribution of the equivalent annual construction cost per mile?

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter4: Economic Evaluation In Health Care

Section: Chapter Questions

Problem 10QAP

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