Cha 5 1 5 6 9

Cha 5 1 5 6 9 - Rezoned apartments Point 2 Expected value...

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Cha 5 1 Plastic Year 1 Year 2 Year 3 Year 4 Demand for plastic sprinklers 97 115 136 141 Percentage of capacity used 48.5% 57.5% 68.0% 70.5% Machine requirements .485 .575 .680 .705 Labor requirements 1.94 2.30 2.72 2.82 Bronze Year 1 Year 2 Year 3 Year 4 Demand for bronze sprinklers 21 24 29 34 Percentage of capacity used 58.3% 66.7% 80.6% 94.4% Machine requirements 1.75 2.00 2.42 2.83 Labor requirements 3.50 4.00 4.84 5.66
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5 For the small facility, NPV = .40 ($12 Million) + .60 ($10 Million) - $6 Million = $4.8 Million Do nothing, NPV = $0 For the large facility NPV = .40($14 Million) + .60($10 Million) - $9 Million = $2.6 Million Therefore, build the small facility. $12 Million $14 Million $10 Million $10 Million High High Low Low .40 .40 .60 .60 Small Facility Large Facility $6 Million $9 Million $0 Do nothing
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6 Rezoned shopping center: Point 1: Expected value = .70($4 Million) + .30($5 Million) = $4.3 Million
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Unformatted text preview: Rezoned apartments: Point 2: Expected value = .60($4.5 Million) + .40($3 Million) = $3.9 Million Since a shopping center has more value, prune the apartment choice. In other words, if rezoned, build a shopping center with a profit of $4.3 Million - $3 Million = $1.3 Million If not rezoned: Point 3: Expected Profit is $2.4 Million - $2 Million = $.4 Million Expected profit is .60($1.3 Million) + .40($.4 Million) = $.94 Million $4 Million $3,000 x 1500 =$4.5 Million $2,000 x 1500 = $3 Million $5 Million $4,000 x 600 = $2.4 Million .70 .30 .60 Shopping Center Apartments Houses .60 .40 .40 Rezoned Not Rezoned 2 1 3 $3 Million $2 Million 9. The company should drill for an expected value of $68,000. Lease .16X -100000 .40 X 50000 .24 X 10000 .2 X 200000...
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This note was uploaded on 10/16/2010 for the course BUS 105 taught by Professor Singh during the Spring '08 term at UC Riverside.

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Cha 5 1 5 6 9 - Rezoned apartments Point 2 Expected value...

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