Kiley Electronics is considering a project that has the following cash flow data. Whatis the project's IRR, and should the firm accept the project based on IRR if its WACCis 13.00%?Year0123Cash flows-$1,100$450$470$49013.31%; Accept13.31%; Reject-14.64%; Reject11.98%; Accept11.98%; Reject

Option a: This option is correct. Step 1:We have to calculate the IRR of the project.We will use the…

Answered: Kiley Electronics is considering a…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 21P

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A. A company wants to produce a souvenir with a marketing life of six months. Uncertainty surrounds the likely sales volume as well as the fixed costs of the venture as shown below: Sales units Probability Contrn. /unit Probability Fixed cost K7 K5 100 000 0.3 80 000 0.6 60 000 0.1 1.0 0.5 0.5 1.0 Determine the expected value of the contribution K400 000 K450 000 K500 000 Probability 0.2 0.5 0.3 1.0
Suppose that Skipper's insurer views him as having the following distribution for the present value of losses: (i) Probability 0.02 0.04 0.10 0.84 Loss $20,000 5,000 1,000 0 What is the fair premium for full coverage if the competitive loading (administrative costs and capital costs) equals 15% of expected claim cost? Suppose that Skipper believes his probabilities of losses are one-half of what the insurer believes (expected claim). What is the loading- as a dollar value, and as a percentage of the expected claim on the policy from Skipper's perspective?
Your manager is quite concerned about the recent deterioration of a section of the roof on a building that houses your firm's computer operations. According to your assistant there are three options which merit consideration: A, B, and C. Moreover, there are three possible future conditions that must be included in the analysis: I, which has a probability of occurrence of .5; II, which has a probability of .3; and III, which has a probability of .2. If condition I materializes, A will cost $12,000, B will cost $20,000, and C will cost $16,000. If condition II materializes, the costs will be $15,000 for A, $18,000 for B, and $14,000 for C. If condition III materializes, the costs will be $10,000 for A, $15,000 for B, and $19,000 for C. (A) Draw a decision tree for this problem (B) Using expected monetary value, which alternative should be chosen? Explain your Answer.
2. A city is holding an annual marathon event and wants to produce t-shits. Alfonso was able to obtain previous years' demand and probability data as given in below table. The selling price is $10, cost is $5, and the salvage value is $1. Calculate all payoff numbers in the table and profit. Show work. How many shirts should they prepare? Prepare 1000 Prepare 2000 Prepare 3000 Demand=1000| Demand=2000 Demand=3000 30% 35% 35% Profit I
A manager is quite concerned about the recent deterioration of a section of the roof on a building that houses her firm’s computer operations. According to her assistant there are three options which merit consideration: A, B, and C. Moreover, there are three possible future conditions that must be included in the analysis: I, which has a probability of occurrence of .5; II, which has a probability of .3; and III, which has a probability of .2. If condition I materializes, A will cost $1500, B will cost $2000, and C will cost $1600. If condition II materializes, the costs will be $1500 for A, $1800 for B, and $1900 for C. If condition III materializes, the costs will be $1000 for A, $1600 for B, and $1900 for C. (A) Draw a decision tree for this problem. (B) Using expected monetary value, which alternative should be chosen
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A manager is quite concerned about the recent deterioration of a section of the roof on a building that houses her firm's computer operations. According to her assistant, there are three options which merit consideration: A, B, and C. Moreover, there are three possible future conditions that must be included in the analysis: I, which has a probability of occurrence of .5; II, which has a probability of .3; and III, which has a probability of .2.If condition I materializes, A will cost USD 12,000, B will cost USD 20,000, and C will cost USD 16,000. If condition II materializes, the costs will be USD 15,000 for A, USD 18,000 for B, and USD 14,000 for C. If condition III materializes, the costs will be USD 10,000 for A, USD 15,000 for B, and USD 19,000 for C._____ alternative will yield the most profit_____ is the profit for the said alternative
Based on the following payoff table, answer the following: High Low 90 -10 70 40 Lease 60 55 Prior Probability 0.4 0.6 The maximum likelihood strategy is: Alternative Buy Rent O Lease. Rent. O Buy. O High. O Low.
A manager is quite concerned about the recent deterioration of a section of the roof on a building that houses her firm's computer operations. According to her assistant there are three options which merit consideration: I, II, and III. Moreover, there are three possible future conditions that must be included in the analysis: A, which has a probability of occurrence of .3; B, which has a probability of .5; and C, which has a probability of .2.If condition A materializes, I will cost $12,000, II will cost $20,000, and III will cost $16,000. If condition B materializes, the costs will be $15,000 for I, $18,000 for II, and $14,000 for III. If condition C materializes, the costs will be $10,000 for I, $15,000 for II, and $19,000 for III.(A) Draw a decision tree for this problem.(B) Using expected monetary value, which alternative should be chosen?
The ARA Railroad owns a piece of land along with one of its right-of-ways. The land originally cost ARA $100,000. ARA is considering building a new maintenance facility on this land. ARA determined that the proposal to build the new facility is acceptable if the original cost of the land is used in the analysis, but the proposal does not meet the railroad’s project acceptance criteria if the land cost is above $500,000. An investor has recently offered ARA $1 million for the land. Should ARA build the maintenance facility at this location? Why or why not?
Following is the payoff table for the Pittsburgh Development Corporation (PDC) Condominium Project. Amounts are in millions of dollars. State of Nature Decision Alternative Strong Demand S1 Weak Demand S2 Small complex, d1 8 7 Medium complex, d2 14 5 Large complex, d3 20 -9 Suppose PDC is optimistic about the potential for the luxury high-rise condominium complex and that this optimism leads to an initial subjective probability assessment of 0.8 that demand will be strong (S1) and a corresponding probability of 0.2 that demand will be weak (S2). Assume the decision alternative to build the large condominium complex was found to be optimal using the expected value approach. Also, a sensitivity analysis was conducted for the payoffs associated with this decision alternative. It was found that the large complex remained optimal as long as the payoff for the strong demand was greater than or equal to $17.5 million and as long as the payoff for…
S1: Cost plus contract is a contract used on long term construction contracts in which the contractor agrees to a contract price that is fixed, either at the inception or at a fixed rate per unit of output, which in some cases may be subject to cost escalation clauses.S2: Variable contract is a construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee * A. Both are true B. S2 True; S1 False C. Both are false D. S1True; S2 False

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