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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.

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.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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. 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. D6 X Y N High High (X) Low (X) High (Y) Low (Y) High (Z) Low (Z) Low High Low High Low Investment, Cash Flow, (Year Cash Flow, $1000 Year 3 3) (Year 4) 3 4 $-220,000 $50 $40 $-64,000 $-260,000 $30 $30 $190 $-30 Cash Flow, $1000 (Year 5) 5 $50 $30 $40 $30 $170 $-30 Cash Flow, $1000 (Year 6) 6 $50 $20 $50 $30 $150 $-30 Outcome Probability 0.64 0.36 0.45 0.55 0.7 0.3
Transcribed Image Text: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. 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. D6 X Y N High High (X) Low (X) High (Y) Low (Y) High (Z) Low (Z) Low High Low High Low Investment, Cash Flow, (Year Cash Flow, $1000 Year 3 3) (Year 4) 3 4 $-220,000 $50 $40 $-64,000 $-260,000 $30 $30 $190 $-30 Cash Flow, $1000 (Year 5) 5 $50 $30 $40 $30 $170 $-30 Cash Flow, $1000 (Year 6) 6 $50 $20 $50 $30 $150 $-30 Outcome Probability 0.64 0.36 0.45 0.55 0.7 0.3
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