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Proposal A Proposal B Benefits per year Benefits per year Probability $18,000 | Conservative=0.25 Most likely= 0.60 Optimistic= 0.15 Probability 20,000 23,000 $17,500 | Conservative= 0.40 20,500 23,000 Most likely= 0.35 Optimistic= 0.25

Proposal A Proposal B Benefits per year Benefits per year Probability $18,000 | Conservative=0.25 Most likely= 0.60 Optimistic= 0.15 Probability 20,000 23,000 $17,500 | Conservative= 0.40 20,500 23,000 Most likely= 0.35 Optimistic= 0.25

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Flextire Manufacturing is considering two mutually exclusive proposals. Each will cost $80,000 and will last 6 years. Cash flows and estimated probabilities are presented below. Based on an MARR of 10%, use decision tree analysis to determine which proposal Flextire should consider.

Proposal A Benefits per year Proposal B Benefits per year Probability $18,000 Conservative=0.25 Most likely= 0.60 Optimistic= 0.15 Probability $17,500 Conservative= 0.40 Most likely= 0.35 Optimistic= 0.25 20,000 23,000 20,500 23,000
Transcribed Image Text:Proposal A Benefits per year Proposal B Benefits per year Probability $18,000 Conservative=0.25 Most likely= 0.60 Optimistic= 0.15 Probability $17,500 Conservative= 0.40 Most likely= 0.35 Optimistic= 0.25 20,000 23,000 20,500 23,000
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