Find probability that alternative a is economic alternative

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Reference no: EM131507243

Question: Two mutually exclusive investment alternatives are being considered, and one of them must be selected. Alternative A requires an initial investment of $13,000 in equipment. Annual operating and maintenance costs are anticipated to be normally distributed,

with a mean of $5,000 and a standard deviation of $500. The terminal salvage value at the end of the eightyear planning horizon is anticipated to be normally distributed, with a mean of $2,000 and a standard deviation of $800. Alternative B requires end-of-year annual expenditures over the eight-year planning horizon, with the annual expenditure being normally distributed with a mean of $7,500 and a standard deviation of $750. Using a MARR of 15% per year, what is the probability that Alternative A is the most economic alternative (i.e., the least costly)?

Reference no: EM131507243

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