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MBA, Ph.D in Management
Harvard university
Feb-1997 - Aug-2003
Professor
Strayer University
Jan-2007 - Present
 Ms. Lee Ding is considering whether the following capitol project should be undertaken. Its life is 6 years; it has a 6% salvage value; and her firm uses a 12% MARR.
Â
Initial Cost                  P*                   Annual Net Revenue             P*
$250,000Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.4Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â $Â Â Â Â 75,000Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.2
 300,000                                                  80,000                            Â
 350,000                    0.2                        90,000                             0.2
 400,000                    .05                      100,000                             0.1
 500,000                    .05                      115,000                             0.1
Â
*Probability
Â
a)Â Â Â What is the probability of it costing $300,000?
b)Â Â Â What is the probability of the net revenue being $80,000?
c)Â Â Â Â What is the expected value of the project?
d)Â Â Â Should she do it?
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