Homework Answers
a.
Mean value of savings = (37000 + 4 * 29000 + 18000) / 6 = 28500
NPW of the project = -235000 + 28500 * (P/A,10%,8)
= -235000 + 28500 *5.334926
= -82954.61
b.
Expected value of savings = 0.2* 37000 + 0.55* 29000 + 0.25 *18000 = 27850
NPW of the project = -235000 + 27850 * (P/A,10%,8)
= -235000 + 27850 *5.334926
= -86422.31
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