Purchase Solution

Probabilistic Risk Analysis

Not what you're looking for?

Ask Custom Question

Problem 1
The optimistic, most likely, and pessimistic estimates for a given project are shown in the table below.
Optimistic Most Likely Pessimistic
Capital Investment $90,000 $100,000 $120,000
Useful Life 12 years 10 years 6 years
Market Value $30,000 $20,000 $0
Net Annual Cash Flow $35,000 $30,000 $20,000
MARR (per year) 10% 10% 10%

(a) What is the Annual Worth (AW) of each of the three cases (optimistic, most likely, pessimistic)?
(b) The most critical factors are useful life and net annual cash flow. Complete the table below showing the AW for all combinations of these two factors.
(Please refer attached file for table).

Problem 2
Complete the table below and select the best alternative for levee improvement to protect the town in the event of a flood. Assume a 30-year life on the problem, the levee project will be financed with bonds that will pay 5% interest, and that the annual worth of the average property damage from a flood that exceeds the levee will cost $100,000,000.
(Please refer attached file for table).

Attachments
Purchase this Solution

Solution Summary

Solution to first problem depicts the steps to estimate the Annual Worth in different cases. Solution to second problem calculates the expected loss for different levee improvement levels and selects the optimum improvement level.

Solution provided by:
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution


Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.