1. A proposed investment of $50,000 will have annual revenues starting at $12,000 in the first...

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1. A proposed investment of $50,000 will have annual revenues starting at $12,000 in the first year and then increasing by $1000 each year thereafter. The useful life of the project is uncertain and the possible durations with their probabilities are given below: Useful life (Year) Probability 4 0.1 5 0.2 6 0.5 7 0.2 There will be no salvage value at the end of useful life. Assume the interest rate is also uncertain, and the estimated rates and probabilities are as follows: Interest rate Probability 8% 0.2 10% 0.5 12% 0.3 Is the investment justified by the expected PW method? 1. A proposed investment of $50,000 will have annual revenues starting at $12,000 in the first year and then increasing by $1000 each year thereafter. The useful life of the project is uncertain and the possible durations with their probabilities are given below: Useful life (Year) Probability 4 0.1 5 0.2 6 0.5 7 0.2 There will be no salvage value at the end of useful life. Assume the interest rate is also uncertain, and the estimated rates and probabilities are as follows: Interest rate Probability 8% 0.2 10% 0.5 12% 0.3 Is the investment justified by the expected PW method?

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To determine whether the investment is justified by the expected Present Worth PW method we need to ... View the full answer