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Data Pessimistic Most Likely Optimistic First Cost, $ $1,052 $1000 $1000 Benefit

ID: 1244032 • Letter: D

Question

Data


Pessimistic

Most Likely

Optimistic

First Cost, $

$1,052

$1000

$1000

Benefits/Year

$190

$198

$200

Life , Years

9

12

12

Salvage Value

$0

$0

$100

From the data above:


At a 5% MARR, what is the expected NPV of the project?

a. $737

b. $747

c. $757

d. $767


Please show a full solution with work to help me understand how to come up with appropriate solution.

Data


Pessimistic

Most Likely

Optimistic

First Cost, $

$1,052

$1000

$1000

Benefits/Year

$190

$198

$200

Life , Years

9

12

12

Salvage Value

$0

$0

$100

Explanation / Answer

Take Most likely column. NPV = -1000+(198/(1.05^1))+(198/(1.05^2))+(198/(1.05^3))+(198/(1.05^4))+(198/(1.05^5))+(198/(1.05^6))+(198/(1.05^7))+(198/(1.05^8))+(198/(1.05^9))+(198/(1.05^10))+(198/(1.05^11))+(198/(1.05^12)) = 754.924.....So option C...$757