Data Pessimistic Most Likely Optimistic First Cost, $ $1,052 $1000 $1000 Benefit
ID: 1244032 • Letter: D
Question
Data
Pessimistic
Most Likely
Optimistic
First Cost, $
$1,052
$1000
$1000
Benefits/Year
$190
$198
$200
Life , Years
9
12
12
Salvage Value
$0
$0
$100
From the data above:
At a 5% MARR, what is the expected NPV of the project?
a. $737
b. $747
c. $757
d. $767
Please show a full solution with work to help me understand how to come up with appropriate solution.
Data
Pessimistic
Most Likely
Optimistic
First Cost, $
$1,052
$1000
$1000
Benefits/Year
$190
$198
$200
Life , Years
9
12
12
Salvage Value
$0
$0
$100
Explanation / Answer
Take Most likely column. NPV = -1000+(198/(1.05^1))+(198/(1.05^2))+(198/(1.05^3))+(198/(1.05^4))+(198/(1.05^5))+(198/(1.05^6))+(198/(1.05^7))+(198/(1.05^8))+(198/(1.05^9))+(198/(1.05^10))+(198/(1.05^11))+(198/(1.05^12)) = 754.924.....So option C...$757
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