Modifying an assembly line has a first cost of$80,000, and
Chapter , Problem 10-17(choose chapter or problem)
Modifying an assembly line has a first cost of$80,000, and its salvage value is $0. The firmsinterest rate is 9%. The savings shown in the tabledepend on whether the assembly line runs one, two,or three shifts, and on whether the product is madefor 3 or 5 years.Shifts/ Savings/Useful Lifedayear Probability (years) Probability1 $15,000 0.3 3 0.62 30,000 0.5 5 0.43 45,000 0.2 (a)Give the joint probability distribution for sav-ings per year and the useful life.(b)Define optimistic, most likely, and pessimisticscenarios by using both optimistic, both mostlikely, and both pessimistic estimates. Use a lifeof 4 years as the most likely value. What is thepresent worth for each scenario?
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