D5) Statistics and Probability A plant manager is considering investing in a new $40,000 machine. Use of the new machine is expected to generate a cash flow of about $9,000 per year for each of the next five years. However, the cash flow is uncertain, and the manager estimates that the actual cash flow will be normally distributed with a mean of $9,000 and a standard deviation of $400. The discount rate is set at 5% and assumed to remain constant over the next five years. The company evaluates capital investments using net present value. How risky is this investment? Develop and run a simulation model to answer this question using 50 trials.
D5) Statistics and Probability A plant manager is considering investing in a new $40,000 machine. Use of the new machine is expected to generate a cash flow of about $9,000 per year for each of the next five years. However, the cash flow is uncertain, and the manager estimates that the actual cash flow will be normally distributed with a mean of $9,000 and a standard deviation of $400. The discount rate is set at 5% and assumed to remain constant over the next five years. The company evaluates capital investments using net present value. How risky is this investment? Develop and run a simulation model to answer this question using 50 trials.
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter13: Probability And Calculus
Section13.3: Special Probability Density Functions
Problem 53E
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D5)
Statistics and Probability
A plant manager is considering investing in a new $40,000 machine. Use of the new machine is expected to generate a cash flow of about $9,000 per year for each of the next five years. However, the cash flow is uncertain, and the manager estimates that the actual cash flow will be normally distributed with a mean of $9,000 and a standard deviation of $400. The discount rate is set at 5% and assumed to remain constant over the next five years. The company evaluates capital investments using net present value. How risky is this investment? Develop and run a simulation model to answer this question using 50 trials.
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