Answered: D5) Statistics and Probability A plant…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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D5) Statistics and Probability A plant manager is considering investing in a new $40,000 machine. Use of the new machine is expected to generate a cash flow of about $9,000 per year for each of the next five years. However, the cash flow is uncertain, and the manager estimates that the actual cash flow will be normally distributed with a mean of $9,000 and a standard deviation of $400. The discount rate is set at 5% and assumed to remain constant over the next five years. The company evaluates capital investments using net present value. How risky is this investment? Develop and run a simulation model to answer this question using 50 trials.

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

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