Engineering Economy
Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
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Chapter 12, Problem 2P
To determine

Select the alternative.

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Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: a. If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? b. Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?
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Consolidated Edison Power is evaluating the construction of a new electric generation facility. The two choices are a coal-burning plant (CB) and a gaseous diffusion (GD) plant. The CB plant will cost $160 per megawatt to construct, and the GD plant will cost $180 per megawatt. Owing to uncertainties concerning fuel availability and the impact of future regulations related to air and water quality, the useful life of each plant is unknown, but the following probability estimates have been made .a. Determine the expected life of each plant. b. Based on the ratio of construction cost per megawatt to expected life, which plant would you recommend that Con Ed build?
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