Unfortunately, the Capital Investment Committee refused to approve your recommendation (from above) since you did not consider the uncertainty inherent in these types of investments. Repeat your analysis, this time using Crystal Ball and the following information. What is the probability of meeting the NPV for the investments?
Investment A:
i. Year 0 Investment cost: Triangular distribution (optimistic: $125,000; most likely: $150,000; pessimistic: $175,000)
ii. Year 1-5 operating cost: Normal distribution (mean of $10,000, standard deviation of $2,000)
iii. Year 1 Benefits: Normal distribution (mean of $90,000, standard deviation of $20,000)
iv. Year 2 Benefits: Normal distribution (mean of $55,000, standard deviation of $15,000)
v. Year 3 Benefits: Normal distribution (mean of $35,000, standard deviation of $10,000)
vi. Year 4 Benefits: Normal distribution (mean of $20,000, standard deviation of $5000)
vii. Year 5 Benefits: Normal distribution (mean of $20,000, standard deviation of $5000)
Investment B:
i. Year 0 Investment cost: Triangular distribution (optimistic: $75,000; most likely: $80,000; pessimistic: $95,000)
ii. Year 1 Benefits: Normal distribution (mean of $45,000, standard deviation of $20,000)
iii. Year 2 Benefits: Normal distribution (mean of $15,000, standard deviation of $5,000)
iv. Year 3 Benefits: Normal distribution (mean of $10,000, standard deviation of $3,000)
v. Year 4 Benefits: Normal distribution (mean of $10,000, standard deviation of $3,000)
vi. Year 5 Benefits: Normal distribution (mean of $15,000, standard deviation of $5,000)