The owners of a discount motel chain are considering building a new motel. Optimistic, pessimistic, and most likely estimates of several key parameters have been obtained from the local builders and the chamber of commerce. These estimates are shown in the table below. The life of the motel is estimated to be 15 years, and MARR is 20 percent.

a. Based only on the pessimistic estimates, is the new motel economically attractive?

b. Based only on the most likely estimates, is the new motel economically attractive?

c. Based only on the optimistic estimates, is the new motel economically attractive?

d. Based on a beta approximation of expected value estimates, is the new motel economically attractive?

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Parameter Initial Cost Pessimistic Most Likely Optimistic $10,500,000 $8,875,000 $6,000,000 Annual Operating $350,000 $175,000 $150,000 Annual Revenue $1,500,000 $2,500,000 $3,500,000