54. A project under consideration has a 10 year projected life. The initial investment for the project is estimated to have a mean of $10,000 and a standard deviation of $1,000. The annual receipts are independent with each year’s expected return having a mean of $1,800 and a standard deviation of $200.

MARR is 12%.

For the following questions, determine an analytical solution:

a. Determine the probability that the present worth is negative.
Assume the initial investment and annual receipts are independent and normally distributed.

b. Using a Monte Carlo simulation with 10,000 iterations, estimate the probability that the present worth is negative.