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ESI6553 1st Midterm Exam spring 2010 Solutions

ESI6553 1st Midterm Exam spring 2010 Solutions - 1st...

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1 st Midterm Exam ESI 6553 Systems Design March 4, 2010 Instructor: Dr. Vladimir L. Boginski Research and Engineering Education Facility University of Florida Duration: 60 minutes Rules: Closed books, closed notes. Calculators are allowed. It is important that you show details of your work, where appropriate. Please return questions along with your answers. The UF Honor Code: "We, the members of the University of Florida community, pledge to hold ourselves and our peers to the highest standards of honesty and integrity." "On my honor, I have neither given nor received unauthorized aid in doing this assignment." NAME:
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1. (25 points) The design of a system is to be pursued from one of thee available alternatives (A, B, and C). Each alternative has a life cycle of three years with forecasted profits associated with possible future scenarios. The profits for the corresponding futures are given in the table below (in thousands of dollars). If the probabilities of occurrence of the futures are 20%, 40%, and 40%, respectively, which alternative is the most desirable from an expected profit viewpoint, using an interest rate of 12%? You can use either the present equivalent or the future equivalent of each cash flow to determine your preference. Expected Profit Expected Profit Design A 26.79 37.64 Future 1 2 3 1 2 3 Total 1 2 3 Total Optimistic 20 20 35 0.20 17.86 15.94 24.91 58.71 25.09 22.40 35.00 82.49 Average 10 12 15 0.40 8.93 9.57 10.68 29.17 12.54 13.44 15.00 40.98 Pessimistic 5 5 0 0.40 4.46 3.99 0.00 8.45 6.27 5.60 0.00 11.87 Design B 26.36 37.03 Future 1 2 3 1 2 3 Total 1 2 3 Total Optimistic 40 25 30 0.20 35.71 19.93 21.35 77.00 50.18 28.00 30.00 108.18 Average 12 12 10 0.40 10.71 9.57 7.12 27.40 15.05 13.44 10.00 38.49 Pessimistic 0 0 0 0.40 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Design C 25.46 35.76 Future 1 2 3 1 2 3 Total 1 2 3 Total Optimistic 25 25 25 0.20 22.32 19.93 17.79 60.05 31.36 28.00 25.00 84.36 Average 11 11 11 0.40 9.82
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