ch05_solutions - Exercise 5.4 8,750 Must Depart (.25) 5,000...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Exercise 5.4 8,750 Must Depart (.25) 5,000 Rent 1 Year 8,250 Cheaper to rent for 2 years 10,000 = 5,000 + PV 5,500 @ 10% Not Required to Depart (.75) 6,000 Must Depart (.25) Rent 2 Years 8,250 Sublet (.6) 4,000 = 9,000 – PV 5,500 @ 10% No Sublet (.4) 9,000 Not Required to Depart (.75) 9,000 Solutions Manual: Ch. 5: Decision Analysis/ 1 Exercise 5.10 492K c tru b -s 0 Su 0.4 p= Perform test: Cost: 50K 242K Sell 0 No oil: p=0.59 242K 230K 1,200K Oil: p=0.41 t t tes ithou lw Dril 250K : Cost 192K Outcomes: e t ur No p= struc 0.6 tur e 0 530K Sell 300K Dri l Cos l t 25 0K 780K p= Oil: 0. 65 No oil: p= 50K 0.35 Sell Dr i Co l l st 2 50 K 0 10K 300K 0.25 1,200K =0. 0 p= Oil: No o The best alternative is to drill without testing, for an expected return of $242,000. 1,200K il: p 75 230K Solutions Manual: Ch. 5: Decision Analysis/ 2 ...
View Full Document

This note was uploaded on 11/04/2011 for the course ITIS ITIS 1P97 taught by Professor Dr.susansproule during the Fall '11 term at Brock University, Canada.

Page1 / 2

ch05_solutions - Exercise 5.4 8,750 Must Depart (.25) 5,000...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online