Determine what is the present worth for each scenario/Econometrics
Modifying an assembly line has a first cost of $80,000 and its salvage value is $0. The firm’s interet rate is 9%. The savings shown in the table depend on whether the assembly line runs one, two or three shifts, and on whether the product is made for 3 or 5 years
Shift/days Savings/year probability — useful life years probability
1 $15,000 0.3 3 0.6
2 $30,000 0.5 5 0.4
3 $45,000 0.2
A)Give the joint probability distribution for savings per year and the useful life.
B)Define optimistic, most likelys, and pestimistic scenarios buy using both optimistic, both most likely and both pestimistic estimates. Use a life of 4 years as the most likey value. What is the present worth for each scenario
