You are estimating costs for installing undersea cable in the Persian Gulf (aka the Arabian Gulf). You have the following information concerning installation costs:

? The material cost per kilometer for cable is $100,000.

? You are installing 100 kilometers of cable.

? The cost per kilometer for installation depends on the sea conditions (sea state).

a. What would be the estimated cost of the project if you knew with certainty that, during the time you were installing the cable, you would encounter sea state I 75% of the time and sea state II 25% of the time?

b. Run a Crystal Ball calculation of the total estimated cost of the project, assuming the probability of sea state 1 is normally distributed with a mean of 25% and a standard deviation of 5%. Only sea states I and II are possible. Post your result, including your cost forecast.

c. What is your mean expected cost?

d. What estimated cost provides you 95% assurance that your actual cost will be less than that amount?

Transcribed Image Text:

Sea State I II Cost/kilometer $15,000 $75,000 Sea State I II Cost/kilometer $15,000 $75,000

Answer rating: 100% (QA)

a Sea State Installation Costkilometer Total installa... View the full answer