Decision D6, which has three possible choices (X, Y, or Z), must be made in year 3 of a 6-year study period in order to maximize E(PW). Using an MARR of 16% per year, the investment required in year 3, and the estimated cash flows for years 4 through 6, determine which decision should be made in year 3. High X Low High Y D6 Low High Low Investment, Cash Flow, (Year Cash Flow, $1000 3) Cash Flow, $1000 (Year 6) Cash Flow, Outcome Year 3 (Year 4) $1000 (Year 5) Probability 4 6 $-190,000 High (X) Low (X) High (Y) $50 $50 $40 $30 $30 $50 $30 0.58 $20 $50 $30 $150 $-30 0.42 $-54,000 $40 $30 $170 0.45 0.55 Low (Y) High (Z) Low (Z) $-240,000 $190 0.7 $-30 $-30 0.3 The present worth of X is $ The present worth of Y is $ The present worth of Z is $ Select decision branch Y

Decision D6, which has three possible choices (X, Y, or Z), must be made in year 3 of a 6-year study period in order to maximize E(PW). Using an MARR of 16% per year, the investment required in year 3, and the estimated cash flows for years 4 through 6, determine which decision should be made in year 3. High X Low High Y D6 Low High Low Investment, Cash Flow, (Year Cash Flow, $1000 3) Cash Flow, $1000 (Year 6) Cash Flow, Outcome Year 3 (Year 4) $1000 (Year 5) Probability 4 6 $-190,000 High (X) Low (X) High (Y) $50 $50 $40 $30 $30 $50 $30 0.58 $20 $50 $30 $150 $-30 0.42 $-54,000 $40 $30 $170 0.45 0.55 Low (Y) High (Z) Low (Z) $-240,000 $190 0.7 $-30 $-30 0.3 The present worth of X is $ The present worth of Y is $ The present worth of Z is $ Select decision branch Y

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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