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What is the expected value of the project

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Ms. Lee Ding is considering whether the following capitol project should be undertaken. Its life is 6 years; it has a 6% salvage value; and her firm uses a 12% MARR.

Initial Cost                  P*                   Annual Net Revenue             P*

$250,000                    0.4                  $    75,000                             0.2

 300,000                                                  80,000                             

 350,000                    0.2                        90,000                             0.2

 400,000                    .05                      100,000                             0.1

 500,000                    .05                      115,000                             0.1

*Probability

a) What is the probability of it costing $300,000?

b) What is the probability of the net revenue being $80,000?

c) What is the expected value of the project?

d) Should she do it?

Reference no: EM131482532

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