In conducting a sensitivity analysis of a proposed project, the present worth values of $–10,000, $40,000, and $50,000 were believed to have chances of 25%, 40%, and 35%, respectively. The expected PW is closest to: (choose one)
(a) $19,000
(b) $26,000
(c) $28,500
(d) $31,000
E(PW) = -10,000(0.25) + 40,000(0.4) + 50,000(0.35)
= $31,000
Answer is (d) $31,000
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