Quiz12_Spring09 - F 20 3 =-6000 500(0.8333 1500(0 6944 2000(0.5787 = $-3384 PW O 3 =-4000 3000(P F 20 1 1200(P F 20 2 800(P F 20 3 =-4000

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CHEE 5369/6369 Quiz # 12 (closed book) Tuesday April 28, 2009 For the series of cash flows shown with the associated probabilities, if the interest rate is 20% per year, determine: a) The expected present worth (PW) value. b) The expected annual worth (AW) value. Annual 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 PWO . s =-5000 + 1000(P / A , 20% , 3) =-5000 + 1000(2 . 1065) = $-2894 PW O . 2 = -6000 + 500(P / F , 20 % , 1) + 1500(P / F , 20% , 2) + 2000(P
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Unformatted text preview: / F , 20% , 3) = -6000 + 500(0.8333) + 1500(0 . 6944) + 2000(0.5787) = $-3384 PW O . 3 = -4000 + 3000(P / F , 20 %, 1) + 1200(P / F , 20 %, 2)- 800(P / F , 20% , 3) = -4000 + 3000(0.8333) + 1200(0 . 6944) - 800(0 . 5787) = $-1130 = (PW o . s )(0.5) + (PWo.2)(0.2) + ( PWo 3 )(0 . 3) =-2894(0.5)-3384(0.2) - 1130(0.3) = $-2463 = 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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