A project has a life of 10 years and no salvage value. Your firm uses an MARR of 8% to evaluate projects. The project has uncertain costs and revenue as shown in the table below: Initial Cost Probability $140,000 0.25 $240,000 0.60 $330,000 0.15 Net Revenue $32,000 0.15 $41,000 0.55 $53,000 0.30 Probability Determine the EUAW for the combination of inital cost and revenue with the highest probability of occurence. Express your answer in $ to the nearest $100.

A project has a life of 10 years and no salvage value. Your firm uses an MARR of 8% to evaluate projects. The project has uncertain costs and revenue as shown in the table below: Initial Cost Probability $140,000 0.25 $240,000 0.60 $330,000 0.15 Net Revenue $32,000 0.15 $41,000 0.55 $53,000 0.30 Probability Determine the EUAW for the combination of inital cost and revenue with the highest probability of occurence. Express your answer in $ to the nearest $100.

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

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.4IP

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