Contemporary Engineering Economics Plus MyLab Engineering with eText -- Access Card Package (6th Edition)
6th Edition
ISBN: 9780134162690
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
thumb_up100%
Chapter 12, Problem 17P
(a):
To determine
Calculate the mean and variance.
(b):
To determine
Calculate the probability.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The estimated beta (/3) of a firm is 1.7. The market return (rm) is 14 %, and the risk-free rate (r1) is 7%. Estimate the cost of equity (ie).
"A financial investor has $31,000 to invest. The choices have been narrowed down to the following two options.-OPTION 1:Invest in a foreign bond that will mature in one year. This will entail an immediate brokerage fee of $100. For simplicity, assume that the bond will provide interest of $2,470, $2,130, or $1,527 over the one-year period and that the probabilities of these occurrences are assessed to be 0.29, 0.43, and 0.28, respectively.-OPTION 2:Invest in a $31,000 certificate with a savings-and-loan association. Assume that this certificate has an effective annual rate of 5.6%.Which form of the investment should the investor choose in order to maximize her expected financial gains? Enter the expected net gain (total return - initial investment - fee) of the preferred option."
If s is the standard deviation of a project with expected returns R, the coefficient of variation is:
Chapter 12 Solutions
Contemporary Engineering Economics Plus MyLab Engineering with eText -- Access Card Package (6th Edition)
Ch. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 7PCh. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Prob. 10PCh. 12 - Prob. 11P
Ch. 12 - Prob. 12PCh. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - Prob. 15PCh. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - Prob. 23PCh. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26PCh. 12 - Prob. 27PCh. 12 - Prob. 28P
Knowledge Booster
Similar questions
- Consider the following cash flow diagram. The probability of the pessimistic value of N = 4 years is 0.30, the probability of the most likely value of N = 6 years is 0.50, and the probability of the optimistic value of N = 9 years is 0.2. What is the expected value of the present worth of this project when the interest rate is 8% per year?arrow_forwardWhen evaluating a new project, the firm must consider all off the following factors EXCEPT: Sunk costs such as previous expenditures associated with a market test to determine the feasibility of the project. Changes in net operating working capital attributable to the project. The current after-tax salvage value of a piece of previously acquired land where the new project will be housed. The side effect that the project may have on the firm’s current business and operation.arrow_forwardJill rank-ordered 10 attributes in increasing importance and identified them as A, B, …, J, with a value of 1 assigned to A, 2 to B, etc. (a) What is the sum of the scores? (b) What is the weight for attribute D? (c) Answer the two questions above if Jill decides that attribute D has the same importance as J, but all other scores stay the same.arrow_forward
- 2. Oswego Machine Company (OMC) produces 9,000 multipurpose pliers that sell for $9.50 each. Its present cost function is estimated to be: TC = 25,000 + 3.7Q However, OMC is considering renovating its facilities. The new, technologically advanced plant would have an estimated cost function of: TC = 34,000 + 2.5Q The marketing department claims that the demand for the pliers fits a normal distribution with an expected mean value of 14,000 units per year. What are the current TC, TFC, TVC, ATC, and MC? What is the break-even point for both plant designs? Would you be in favor of renovating the plant?arrow_forwardAnswer the problems on the basis of the above graph and the most likely estimates given as follows: If the profit (R−E) is decreased by 5%, this projectis not profitable. (a) True (b) False.arrow_forwardA stock is currently at $20. It can go to $22 or $18 in 3 months. The risk free rate is 12% per year. A call option with a strike price of $21 is available. If the real world expected return on the stock is 16% per year, what is the implied real world discount rate for the option.arrow_forward
- You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated annual revenue at the end of each year in the eight year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = ε =12% per year, answer the following questions. Using AW, determine whether this proposal is acceptable. What is the ERR of this proposal? Is it acceptable? What is the IRR of this proposal? Is it acceptable? What is the simple and discounted payback period for this proposal?arrow_forwardConsider a project that has an up-front cost of $100. In its first year it earns $30, and then in each subsequent year it earns an additional $10, so that in its second year it earns $40, the following year it earns $50, etc. The project lasts for 8 years so that in the final year its revenue is $100. The project is expected to repeat indefinitely. It has a MARR=13%. The NPW is within $5 of a)601 b)611 c)621 d)631 e)641 f) nonearrow_forwardSunshine Smoothies Company (SSC) manufactures and distributes smoothies. It is considering the "weight loss" smoothies project. The project would require a $4 million investment outlay today The after-tax cash flows would depend on consumers’ demand. There is a 30% chance that demand will be good, and the project will produce after-tax cash flows of $2 million at the end of each year for the next 3 years. There is a 70% chance that demand will be poor, and the project will produce after-tax cash flows of $1 million at the end of each year for the next 3 years. The project is riskier than the firm's other projects, so it has a WACC of 12%. - The firm will know whether the project is success or not after receiving first year's cash flows from normal operating.. - After receiving the first year's cash flows (no matter what receive $1M or $2M in the first year), the firm will have the option to abandon the project. - If the firm decides to abandon the project, the company will no longer…arrow_forward
- Eaton Medical Services is evaluating 10 independent indivisible projects, all with positive NPV. The company's capital budgeting for the year is limited to a maximum of $5,000,000. (A) Use solver to find the optimum combination of projects the company should accept, under the assumption that A and B are mutually exclusive and one of them has to be selected. (B) Ignore the constraint from previous part, assume that project “I” has to be accepted. Use solver to find optimum combination of projects the company should accept now. Please show all steps to compute in excel using solver to get to the right answers. Thank you in advance, will upvote! Project Cost NPV A 1,061,191 122,737 B 561,758 58,102 C 1,647,849 280,660 D 1,026,020 89,365 E 191,870 17,568 F 1,333,625 76,960 G 3,102,642 123,240 H 275,568 79,367 I 2,044,070 60,506 J 1,017,567 56,690arrow_forwardCT Corp. is considering two mutually exclusive projects. Both require an initial investment of P120,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of P67,000 and P75,000 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of P38,500 at the end of each of the next 4 years. Each project has a WACC of 8%. Listed below are the requirements for this data set: Using the replacement chain approach, how much is the NPV of Project X? (Round the final answer to the nearest peso. Use the "NPV formula" in excel for exact computation. Otherwise, answer based on rounded pv factors will also be accepted.) Which of the two projects will be more profitable considering the replacement chain approach on the NPV of Project X? Using the equivalent annuity approach, what is the equivalent annuity of Project Y?…arrow_forwardYou have been asked to evaluate the profitability of building a new distribution center under the following conditions:I. The proposal is for a distribution center costing $1,500,000. The facility has an expected useful life of 35 years and a net salvage value (net proceeds from its sale after tax adjustments) of $225,000.II. Annual savings (due to a better strategic location) of $227,000 are expected, annual maintenance and administrative costs will be $114,000, and annual income taxes are $43,000. Suppose that the firm's MARR is 12%. Determine the net present worth of the investment.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education