QUESTION 2 A company is considering investing in a new piece of equipment to reduce the...
QUESTION 2
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A company is considering investing in a new piece of equipment to reduce the annual costs of producing its products. The new piece of equipment may operate 4 or 5 years. The annual savings may be $40,000, $50,000, or $60,000. The probabilities for each scenario is given in the following table:
Savings Probability Useful Life Probability $40,000 0.2 4 yrs 0.8 $50,000 0.7 5 yrs 0.2 $60,000 0.1 What is the joint probability of the investment saving $50,000 for 4 yrs?
Homework Answers
Answer:
Joint probability of the investment saving $50,000 for 4 yrs?
= Probability of saving of $50,000 x Probability of useful life of 4 years
= 0.7 x 0.8
= 0.56
Thus the joint probability of the investment saving $50,000 for 4 yrs is 0.56
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