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
Item-total correlation is an  extensively used method for checking the homogeneity of the scale made up of number of items. It is simply the Pearson's product moment correlation c

Model is the description of the supposed structure of a set of observations which can range from a fairly imprecise verbal account to, more commonly, a formalized mathematical exp

Mendelian randomization is the term applied to the random assortment of alleles at the time of gamete formation, a process which results in the population distributions of genetic

i will like to submit my project for you to do on chi-square, ANOVA, and correlation and simple regression. how can we do this?

R-squared is regarded as the coefficient of determination and is used to give the proportion of the fluctuation of the variance of one variable to another variable. R-squared also

Non linear model : A model which is non-linear in the parameters, for instance are   Some such type of models can be converted into the linear models by linearization (the s

Personal probabilities : A radically special approach for allocating probabilities to events than, for instance, the commonly used long-term relative frequency approach. In this ty

Linearity - Reasons for Screening Data Many of the technics of standard statistical analysis are based on the assumption that the relationship, if any, between variables is li

Reciprocal transformation is a transformation of the form y =1/x, which is specifically useful for certain types of variables. Resistances, for instance, become conductances, and

Treatment allocation ratio is the ratio of the number of subjects allocated to the two treatments in a clinical trial. The equal allocation is most usual in practice, but it might