Probability distribution of the net present value, Advanced Statistics

Suppose that $4 million is available for investment in three projects.  The probability distribution of the net present value earned from each project depends on how much is invested in each project.  Let It be the random variable denoting the net present value earned by project t.  The distribution of It depends on the amount of money invested in project t, as shown in Table 2 (a zero investment in a project always earns a zero NPV).  Use dynamic programming to determine an investment allocation that maximises the expected NPV obtained from the three investments.

Table

 

Investment (millions)

Probability

Project 1

$1

P(I1 = 2) = 0.6

P(I1 = 4) = 0.3

P(I1 = 5) = 0.1

$2

P(I1 = 4) = 0.5

P(I1 = 6) = 0.3

P(I1 = 8) = 0.2

$3

P(I1 = 6) = 0.4

P(I1 = 7) = 0.5

P(I1= 10) = 0.1

$4

P(I1 = 7) = 0.2

P(I1 = 9) = 0.4

P(I1= 10) = 0.4

Project 2

$1

P(I2 = 1) = 0.5

P(I2 = 2) = 0.4

P(I2 = 4) = 0.1

$2

P(I2 = 3) = 0.4

P(I2 = 5) = 0.4

P(I2 = 6) = 0.2

$3

P(I2 = 4) = 0.3

P(I2 = 6) = 0.3

P(I2 = 8) = 0.4

$4

P(I2 = 3) = 0.4

P(I2 = 8) = 0.3

P(I2 = 9) = 0.3

Project 3

$1

P(I3 = 0) = 0.2

P(I3 = 4) = 0.6

P(I3 = 5) = 0.2

$2

P(I3 = 4) = 0.4

P(I3 = 6) = 0.4

P(I3 = 7) = 0.2

$3

P(I3 = 5) = 0.3

P(I3 = 7) = 0.4

P(I3 = 8) = 0.3

$4

P(I3 = 6) = 0.1

P(I3 = 8) = 0.5

P(I3 = 9) = 0.4

Posted Date: 3/19/2013 3:50:29 AM | Location : United States







Related Discussions:- Probability distribution of the net present value, Assignment Help, Ask Question on Probability distribution of the net present value, Get Answer, Expert's Help, Probability distribution of the net present value Discussions

Write discussion on Probability distribution of the net present value
Your posts are moderated
Related Questions
Difference between tretment design and experimental design

Mean squarederror is the expected value of square of the difference between an estimator and the true value of the parameter. If the estimator is unbiased then the mean of the squ

difference between histogram and historigram

Paired samples are the two samples of the observations with the characteristic feature with each of the observation in one sample have only one matching observation in the other s

Hazard plotting  is based on the hazard function of a distribution, this procedure gives estimates of distribution parameters, the proportion of units failing by the given time per

calculate absorbance value from concentration

Laplace distribution : The probability distribution, f(x), given by the following formula   Can be derived as the distribution of the difference of two independent random var

Radical statistics group : The national network of the social scientists in United Kingdom committed to the critique of statistics as taken in use in the policy making procedure. T

Bootstrap : The data-based simulation method/technique for the statistical inference which can be used to study the variability of the estimated characteristics of the probability

Balanced incomplete repeated measures design (BIRMD): An arrangement of the N randomly selected experimental units and k treatments in which each and every unit receives k1 treatm