Unfortunately, the Capital Investment Committee refused to approve your recommendation (Problem 1) since you did not consider the uncertainty inherent in these types of investments. You pull out your very dog-eared text from PMAN 635 and repeat your analysis, this time using Crystal Ball and the following information: a. Investment A: i. Year 0 Investment cost: Triangular distribution (optimistic: $125,000; most likely: $150,000; pessimistic: $175,000) ii. Year 1-5 operating cost: Normal distribution (mean of $10,000, standard deviation of $2,000) iii. Year 1 Benefits: Normal distribution (mean of $90,000, standard deviation of $20,000) iv. Year 2 Benefits: Normal distribution (mean of $55,000, standard deviation of $15,000) v. Year 3 Benefits: Normal distribution (mean of $35,000, standard deviation of $10,000) vi. Year 4 Benefits: Normal distribution (mean of $20,000, standard deviation of $5000) vii. Year 5 Benefits: Normal distribution (mean of $20,000, standard deviation of $5000) b. Investment B: i. Year 0 Investment cost: Triangular distribution (optimistic: $75,000; most likely: $80,000; pessimistic: $95,000) ii. Year 1 Benefits: Normal distribution (mean of $45,000, standard deviation of $20,000) iii. Year 2 Benefits: Normal distribution (mean of $15,000, standard deviation of $5,000) iv. Year 3 Benefits: Normal distribution (mean of $10,000, standard deviation of $3,000) v. Year 4 Benefits: Normal distribution (mean of $10,000, standard deviation of $3,000) vi. Year 5 Benefits: Normal distribution (mean of $15,000, standard deviation of $5,000) c. If the Internal Rate of Return (IRR) is still 6%, what is the NPV for each investment?

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Status NEW Posted 06 Aug 2017 01:08 PM My Price 7.00

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