The following table shows the expected profit for each of four alternatives under each of five possible futures. Which alterative would be selected using
a. The Maximax criterion?
b. The Maximum likelihood criterion?
c. The Maximin rule?
d. The aspiration
Find the Present Value of
a. An Annual Payment of $1500 over 6 years with an interest rate of 5%.
Annual
Interest
Duration
$1,500.00
5.00%
6 years
PV
$7,613.54
b. A final payment, in 6 years, of $4500, with an interest rate of 6%.
Final amou $ 4,500.00
In
A firm is considering the following alternatives for equipment which provides essentially the same service. The cost of money is 12%. The evaluation life of the situation is 12 year
a. Which alternative is preferable.
b. Breakeven times which would result
Probabili
ty
0.25
0.35
0.4
F1
F2
F3
a.
Alternati
ve
A1
$120,000
$115,000
$315,000
$196,250.00
A2
$115,000
$120,000
$220,000
$158,750.00
A3
-$10,000
$25,000
$420,000
$174,250.00
A4
$0
$85,000
$450,000
$209,750.00 Highest expected value - select A4
b.
c.
Ex
a. Present Value of $45,000 paid in 10 years, interest rate 9.5%
b. Final value of $50,000 after 12 years, interest rate 11%
c. Annual equivalent value of $10,000 now, over 8 years, at an interest rate of 7.5%.
Principle
Duration
$45,000.00
Interest rate