A project has a life of 10 years and no salvage value. Your firm uses anMARR of 8% to evaluate projects. The project has uncertain costs andrevenue as shown in the table below:NetInitial Cost ProbabilityProbabilityRevenue$110,000 0.25$30,000 0.15$240,000 0.60$44,0000.55$330,000 0.15$54,0000.30Determine the risk for the project expressed as the standard deviation ofthe expected value of the EUAW. Express your answer in $ to the nearest$100.

The project has three different scenarios, each with a probability and an associated initial cost…

Answered: A project has a life of 10 years and no…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Kipling Equipment Inc. must decide to produce either a face mask or a face shield to X alleviate the spread of a quickly evolving coronavirus. The face mask is disposable and developing it could potentially lead to a profit of $300,000 if competition is high or a profit of $470,000 if competition is low. The face shield, on the other hand, is reusable and has the potential of generating a fixed profit of $430,000 irrespective of high or low competition. The probability of high competition is 52% while that of low competition is 48%. Co Part A Construct a decision tree or a payoff table for the decision problem and use it to answer the following questions. a) What is the expected monetary value of the optimal decision? $ b) Based on expected monetary value, what should the Kipling do? $ Produce face shield c) What is the upper bound on the amount Kipling should pay for additional information? $ Part B
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