EGG 307 Exam 3 Solutions

# EGG 307 Exam 3 Solutions - EGG 307 3rd Midterm Exam(sample...

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EGG 307: 3 rd Midterm Exam (sample solutions) Question 1 Solution: Calculate the expected EUAC for each alternative (a) Leave the valve as is: Expected EUAC = 0.1(-20,000) + 0.3(-10,000) = -\$5,000 (b) Repair the valve: Exp. . EUAC = -\$15,000(A/P, 15%, 10) + 0.08(-20,000) + 0.2(-10,000) = -\$6,589 (c) Replace with new valve Exp. . EUAC = -\$40,000(A/P, 15%, 10) +25,000(A/F, 15%, 10) +0.04(-10,000) = -\$7,139 The most economical alternative, one with the lowest EUAC, is to leave the valve as is. Question 2 Solution : (a) (i) AW(Pessimistic) = -\$200,000(A/P, 15%, 6) + 35,000 = -\$17,847 (ii) AW(Optimistic) = -\$200,000(A/P, 15%, 12) + 50,000 = +\$13,104 (b) AW(most likely) = -\$200,000(A/P, 15%, 9) + 45,000 = +\$3,085 Expected PW = 0.2PW(Pess. .) + 0.5PW(Most likely) + 0.3PW(Opt…) = 0.2(-17,847) + 0.5(3,085) + 0.3(13,104) = +\$1,904 Since the expected PW is greater than zero, recommend installation of the equipment.

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## This note was uploaded on 07/13/2009 for the course EGG a taught by Professor Dr.kaseko during the Spring '09 term at University of Nevada, Las Vegas.

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EGG 307 Exam 3 Solutions - EGG 307 3rd Midterm Exam(sample...

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