ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- At races, your horse, White Rum, has a probability of 1/20 of coming 1st, 1/10 of coming 2nd and a probability of 1⁄4 in coming 3rd. First place pays $5,000 to the winner, second place $4,000 and third place $1,350.Hence, is it worth entering the race if it costs $1050? Your company plans to invest in a particular project. There is a 40% chance you will lose $3,000, a 45% chance you will break even, and a 15% chance you will make $5,500. Based solely on this information, what should you do? On 1st Jan 2006, a business had inventory of $19,000. During the month, sales totalled $32,500 and purchases $24,000. On 31st Jan 2006 a fire destroyed some of the inventory. The undamaged goods in inventory were valued at $11,000. The business operates with a standard gross profit margin of 30%. Based on this information, what is the cost of the inventory destroyed in the fire?arrow_forwarda) (3) Consider two investments X and Y, where X pays $0 and $10 with equal probability and Y pays 0 with probability 0.75 and $20 with probability 0.25. What investment would an investor choose if her utility function is u(x) = x? u(x) = x u(x) = 1-e 10 () (i) (ii)arrow_forwardOnline sale Suppose a student is considering selling their used smartphone online. They can sell it now for $p or wait and sell it next month for a different price. If they wait, they will receive a random offer with an equal probability of being either $300 or $100. The student can only receive one offer and cannot sell the phone after the second month. 1. Calculate the expected price in the next month. 2. Suppose that the current price p is equal to 200. (a) Give a reason why selling today could be a good idea. (b) Give a reason why selling next month could be a good idea.arrow_forward
- Becky is deciding whether to purchase an insurance for her home againtst burglary. the payoff for her is shown as follow: Net worth of her Net worth of her home: $ 20000 burglary(10%) Net worth of her Net worth of her home: $50000 burglary (90%) The insueance would cover all the loss from burlary and the insurance fee is $8000. Her utility funtion is given as u=w ^0.3 Should Beck purchase the insurance Explain.arrow_forwardplease only do: if you can teach explain each partarrow_forward2. Christiaan can go hiking, or he can stay at home. Hiking would be fun if nothing bad happens, but there is a risk if he goes hiking that he will meet a bear (not fun) or get bitten by a snake (very not fun). Christiaan decides that if there is a 5% chance of meeting a bear and a 1% chance of getting bitten by a snake, he would prefer to go hiking rather than stay at home. However, if the chance of meeting a bear is 10% and the chance of a snake bite is 5%, he definitely would rather stay at home. then (a) Consider the utility function: U (stay home) = 25, U (hike no event) = 100, U (hike & snake) -1000, U (hike & bear) = -200. Does this utility function represent Christiaan's pref- erences? Explain. (b) Suppose that the utility function in (a) does represent Christiaan's preferences. Would Christiaan prefer to hike or stay home if the probability of meeting a bear is 6% and the probability of being bitten by a snake is 4%? Show your work.arrow_forward
- Suppose 1,250 raffle tickets are being sold for $5 each. One ticket will be chosen to receive a cash prize of $2,500, and three tickets will be chosen to recelve cash prizes of $500. Let x be the amount of money won/lost by purchasing one raffle ticket. Find the expected value for . (Round your answer to the nearest penny. Do not include as sign in your answer. Your answer may be positive or negative.)arrow_forwardTo go from Location 1 to Location 2, you can either take a car or take transit. Your utility function is: U= -1Xminutes -5Xdollars +0.13Xcar (i.e. 0.13 is the car constant) Car= 15 minutes and $8 Transit= 40 minutes and $4 What is your probability of taking transit given the conditions above? What is your probability of taking transit if the number of buses on the route were doubled, meaning the headways are halved? Remember to include units.arrow_forwardanswer this properly, remember (0.35x50)+(0.65x10)=£24 herearrow_forward
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