The market value of a certain asset depends upon its useful life as follows: a. The asset

Question:

The market value of a certain asset depends upon its useful life as follows:

Useful Life Market Value $18,000 $12,000 $6,000 3 years 4 years 5 years

a. The asset requires a capital investment of $120,000, and MARR is 15% per year. Use Monte Carlo simulation and generate four trial outcomes to find its expected equivalent AW if each useful life is equally likely to occur.
b. Set up an equation to determine the variance of the asset€™s AW.

Monte Carlo simulation
Monte Carlo simulation is a technique used to understand the impact of risk and uncertainty in financial, project management, cost, and other forecasting models. A Monte Carlo simulator helps one visualize most or all of the potential outcomes to... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...

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