evecon3 - Kelley Benham AEC 3233 Homework 3 A cost-benefit...

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Kelley Benham AEC 3233 Homework 3 A cost-benefit analysis is used to see if a project is worth doing. In general, if the benefits out weight the cost, then it is a good project. With the projections I have collected the project is worth doing. The first nine years no money will be earned, and a lot will be invested in this project. However, beginning in year ten, the benefits will out weight the costs. At the end of twenty years, the project will have made a small profit. My figures are given in Table 1. If the benefits change, it will throw the entire analysis off. My employee has collected three numbers that may be the annual benefit. The first number is used to calculate Table 1. Tables 2 and 3 show how the benefits may change. If the benefits are those seen in Table 2, I would suggest to not go ahead with the project. I calculated the probability of getting each payout. The probability of getting a payout of $412,000 is 40%. For a payout of $200,000, the probability is 53%. Finally, for a payout of $676,015 the probability is 7%. Using these numbers, I have calculated the
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