A manufacturing firm is considering a project which has an economic service life of one year with no salvage value. The initial cost for the project is $2,500. There is a 0.18 probability that the year-end revenue is $2,280. There is a 0.62 probability that the year-end revenue is $3,910. There is a 0.2 probability that the year-end revenue is $4,730. If the firm's MARR is 14%, what is the variance of the project?

A manufacturing firm is considering a project which has an economic service life of one year with no salvage value. The initial cost for the project is $2,500. There is a 0.18 probability that the year-end revenue is $2,280. There is a 0.62 probability that the year-end revenue is $3,910. There is a 0.2 probability that the year-end revenue is $4,730. If the firm's MARR is 14%, what is the variance of the project?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 4MC

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