Engineering Economic Analysis

Expected Value 313 This prQbability distribution function shows that there is a 20% chance of having a negative PW. It also show ...

314 UNCERTAINTY IN FUTURE EVENTS The first cost of the project in Example 10-5 is $25,000. Use the expected values for annual be ...

Expected Value 315 With an expected PW of $10,209, this is an attractive project. While there is a 20% chance of a negative PW, ...

316 UNCERTAINTY IN FUTURE EVENTS Then the EUAC of the first cost and the expected annual flood damage are added together to find ...

. Economic Decision Trees 317 1: Build New Product 8: Revenue $100Klyear 7: Net Revenue ="$0 4: Net Revenue Year!:;:: $100K 5: N ...

318 UNCERTAINTY IN FUTURE EVENTS What decision should be made on the new product summarized in Figure 1O-3?What is the expected ...

EconomicDecision Trees 319 1: Build New Product t= 0 FIGURE 10-4 Partially solved decision tree for new product. The next step i ...

320 UNCERTAINTY IN FUTURE EVENTS PW '"" $590,915 7: Net Revenue = $0 PW= $46,640 1: Build New Product 4: Net Revenue Year 1 '""$ ...

EconomicDecision Trees 321 $0 $300 «$500 deductible) $500 $0 $300 $13,000 FIGURE 10-6 Decision tree for buying auto collision in ...

322 UNCERTAINTY IN FUTURE EVENTS Thus, buying insurance lowers the expected cost of an accidentby $375. To evaluatewhether we sh ...

.- .. - - - - - --- Risk 323 This equation is the square root of the difference between the average of the squares and the squar ...

324 UNCERTAINTY IN FUTURE EVENTS Using the probability distribution for the PW from Example 10-6, calculate the PW's standard de ...

I RiskVersus Return 325 Project Financing 1 2 3 4 5 6 7 8 F SOLUTION IRR 13.1% 12.0 7.5 6.5 9.4 16.3 15.1 15.3 4.0 Standard ...

, -" -- - -. - 326 UNCERTAINTY INFUTURE EVENTS , There are models of risk and return that can allow us to choose between Project ...

r Simulation 327 FIGURE 10-8 Excel spreadsheet for simulation (N=25). Note for students who have had a course in probability and ...

328 UNCERTAINTY IN FUTURE EVENTS o 8 FJGURE .10-9 Graph of 1M values. Stand-alone simulation programs and commercialspreadsheet ...

Simulation 329 FIGURE 10-10 Simulation spreadsheetfor Example 10-15 and 10-16. RiskNonnal function, however spreadsheets with @R ...

330 UNCERTAINTY IN FUTURE EVENTS Summary Estimating the future is required for economic analysis, and there are several ways to ...

. .. r Problems 331 be installed elsewhere. Estimate the optimistic life, most likely life, and pessimistic life for tele- phone ...

332 .UNCERTAINTY IN FUTURE EVENTS - What would be his expected outcome if he invests the $1000?' 10-12 The MSU football team has ...