Assume a project has three variables: life, first cost, and annual cost. Assume there is no salvage value. For each variable there are three possible values as listed below. The firm uses an interest rate of 8 percent to evaluate engineering projects. For each variable, determine which value is "optimistic" and which is "pessimistic". The remaining value is "most likely". Compute each variable's estimated mean (using the "optimistic/most likely/pessimistic" formula) and using those computed mean values, compute the project's expected present value cost. First cost: -$480,000, -$620,000, -$860,000 Annual cost: -$75,000, -$85,000, -$110,000 Life: 8 years, 10 years, 24 years What is Expected Net Present Worth?
Assume a project has three variables: life, first cost, and annual cost. Assume there is no salvage value.
For each variable there are three possible values as listed below. The firm uses an interest rate of 8 percent to evaluate engineering projects.
For each variable, determine which value is "optimistic" and which is "pessimistic". The remaining value is "most likely".
Compute each variable's estimated mean (using the "optimistic/most likely/pessimistic" formula) and using those computed mean values, compute the project's expected present value cost.
First cost: -$480,000, -$620,000, -$860,000
Annual cost: -$75,000, -$85,000, -$110,000
Life: 8 years, 10 years, 24 years
What is Expected Net Present Worth?
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