5. Flextire Manufacturing is considering two mutually exclusive proposals. Each will cost $80,000 and wi 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 Proposal B Probability Benefits per year Benefits per year $18,000 Probability Conservative= 0.40 Conservative=0.25 $17,500 20,000 Most likely= 0.60 20,500 Most likely= 0.35 23.000 Optimistic= 0.15 23.000 Optimistic= 0.25

5. Flextire Manufacturing is considering two mutually exclusive proposals. Each will cost $80,000 and wi 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 Proposal B Probability Benefits per year Benefits per year $18,000 Probability Conservative= 0.40 Conservative=0.25 $17,500 20,000 Most likely= 0.60 20,500 Most likely= 0.35 23.000 Optimistic= 0.15 23.000 Optimistic= 0.25

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 7E

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Similar questions

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The tree diagram in figure below describes the uncertain cash flows for an engineering project. The analysis period is two years, and MARR = 18% per year. Based on this information, a. What are the E(PW), V(PW), and SD(PW) of the project? b. What is the probability that PW20? Click the icon to view the tree diagram. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 18% per year, a. Calculate the E(PW), V(PW), and SD(PW) of the project. E(PW)-$ (Round to the nearest dollar) KILR
When comparing multiple alternatives: a. Choose the alternative with the greatest PW over the planning horizon b. Choose the alternative with the greatest AW over the planning horizon c. Check our assumptions about the MARR, as this could impact our decision d. All of the above.
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Wolfpack Inc., a textile manufacturing company, is considering opening a production and shipping facility to keep up with demand for its pillows. The facility is expected to require an initial investment of $190,000 and will have a $36,000 salvage value after 5 years. Net annual revenue is estimated to be $100,000 while annual maintenance costs are estimated to be X% of the annual revenue. Determine how sensitive the decision to invest in the new facility is to the estimates of initial cost and annual revenues. Use a MARR of 4% per year and a 5 years study period