A new equipment costing $100K is required to manufacture a product that has an uncertain market...
- A new equipment costing $100K is required to manufacture a product that has an uncertain market potential. The marketing department has come up with the following market potential.
Pessimistic Most likely Optimistic
Estimate Estimate
Probability 0.3 0.5 0.2
Annual sales $25K $50K $65K
The product may be on the market for 3 or 4 or 5 years with probabilities of 0.15, 0.5 and 0.35, respectively.
a. If MARR is 8%, prepare a joint probability distribution table and compute the Expected Net Present Worth (NPW) for this product.
b. Compute the risk as Probability of Loss and compute the risk as a standard deviation for this distribution of outcomes.
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