D2 Determine the probability that the following tree reflecting demand for a product, given an expense ofacquiring the necessary equipment of $100k, has a rate of return higher than 30% per year.4.Sales: $27k/yr4 yr(2)Sales: $26k per year with a $35k overhaul in yr 4DecideLow demapd p=0.35$100k acquisition costHigh demand p=0.65Sales $45k/yr10 xDecide12 yrsSales $35k per year with a $35k overhaul in yr 6

Given, The Acquisition cost is $100kThere are two demand with two probabilities : Low Demand with…

Answered: Determine the probability that the…

Determine the probability that the following tree reflecting demand for a product, given an expense of acquiring the necessary equipment of $100k, has a rate of return higher than 30% per year.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Determine the probability that the following tree reflecting demand for a product, given an expense of
acquiring the necessary equipment of $100k, has a rate of return higher than 30% per year.
4.
Sales: $27k/yr
4 yr
(2)
Sales: $26k per year with a $35k overhaul in yr 4
Decide
Low demapd p=0.35
$100k acquisition cost
High demand p=0.65
Sales $45k/yr
10 x
Decide
12 yrs
Sales $35k per year with a $35k overhaul in yr 6

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