Quiz12_Spring08

# Quiz12_Spring08 - 0 5787 = \$-3384 PW 03 =-4000 3000(P F 2 1...

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~ CHEE 5369 / 6369 ~ D \ Quiz # 12 (closed book) D Tuesday April 22, 2008 For the s eries of cash flows s h o wn with the associated probabilities, if the interest rate is 20% per year, determine: a) The e x pected pre s ent worth (PW) v alue . b) The expected annual worth (AW) value. A n nual Cash Flow, \$ / year Year Prob. = 0 . 5 Prob. = 0.2 Prob . = 0 . 3 0 -5,000 - 6,000 - 4,000 1 1,000 500 3 , 000 2 1,000 1,500 1,200 3 1 , 000 2,000 - 800 PW O . s = - 5 000 + 100 0 (P / A , 20% , 3) = -5000 + 1000(2 . 1 065) = \$ - 2 894 PW O . 2 = -6000 + 500( P / F , 20%,1) + 1 500(P / F , 20%,2) + 2000( P I F , 2 0 % , 3) = -6000 + 500(0.8333) + 15 0 0(0.6944) + 2000(
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Unformatted text preview: 0. 5787) = \$-3384 PW 03 =-4000 + 3000(P / F , 2 %, 1 ) + 1 2 00 (P / F , 2 % , 2)-800( P / F , 2 %,3) =-4000 + 3000(0 . 8333) + 1200(0 . 6944)-800(0.5787) = \$-1130 = (PW o . s ) (0 . 5) + (PW o 2 )(0 .2) + (PW o J )( 0. 3) =-2894(0 . 5)- 3384( . 2) - 1130(0 . 3) = \$-2 463 = E(PW)(A / P , 20 %, 3) = -2463(0 . 47473) = \$-1169...
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## This note was uploaded on 04/13/2011 for the course CHEE 5369 taught by Professor Alim during the Spring '11 term at University of Houston.

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