Solution 19.27 Repeat Problem 19.26, except use the normal distribution for the CFAT in years 7 through 10 with an expected value of $2 million and a standard deviation of $500,000.
Problem 19.26
Jennifer, a senior project manager, estimated net cash flow after taxes (CFAT) for a large project she is working on. The additional CFAT of $2,800,000 in year 10 is the salvage value, estimated at 9% of the $31 million first cost for all capital assets.
 FIGURE 1.png)
The PW value at the current MARR of 7% per year is
PW = ?31,000 + 5400(P?A,7%,6) + 2040(P?A,7%,4)(P?F,7%,6) + 2800(P?F,7%,10) = $767
Jennifer believes the MARR will vary over a relatively narrow range, as will the CFAT, especially during the out years of 7 through 10. She is willing to accept the other estimates as certain. Use the following probability distribution assumptions for MARR and CFAT to perform a simulation—hand- or spreadsheet-based.
MARR. Uniform distribution over the range 6% to 10%.
CFAT, years 7 through 10. Uniform distribution over the range $1,600,000 to $2,400,000 for each year.
Plot the resulting PW distribution. Should the plan be accepted using decision making under certainty? Under risk?
Use the spreadsheet Random Number Generator (RNG) on the tools toolbar to generate
CFAT values in column D from a normal distribution with ? = $2000 and ? = $500. The
RNG screen image is shown below.
 FIGURE 4.png)
 ANSWER.png)
You might also like to view...
The ________ is a language where the elements are steps or states that perform associated actions on the process with transitions conditions used to move from the current step or state to next
A) Ladder Logic (LD) B) Structured Text C) Sequential Function Chart (SFC) D) Function Block Diagram (FBD)
What types of numbers can be divided evenly by the number 1??
What will be an ideal response?
To complete cell division, a process known as ____________________ occurs to divide the cytoplasm in the cell.
Fill in the blank(s) with the appropriate word(s).
Technician A says that the exhaust system also contains a catalytic converter, exhaust pipes, and muffler. Technician B says that the entire exhaust system is supported by metal hangers that isolate the noise and vibration of the exhaust from the rest of the vehicle. Which technician is correct?
A) Technician A B) Technician B C) Both technicians D) Neither technician