Problem
Suppose that, for a certain potential investment project, the optimistic, most likely, and pessimistic estimates are as shown in the accompanying table.
a. What is the AW for each of the three estimation conditions?
b. It is thought that the most critical factors are useful life and net annual cash flow. Develop a table showing the net AW for all combinations of the estimates for these two factors, assuming all other factors to be at their most likely values.
Most
Optimistic Likely Pessimistic
Capital $90,000 $100,000 $120,000
investment Useful life 12 years 10 years 6 years
Market value $30,000 $20,000 $0
Net annual $35,000 $30,000 $20,000
cash flow MARR 10% 10% 10%
(per year)
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.