1.You are estimating costs for installing undersea cable in the Persian Gulf (aka the Arabian Gulf).You have the following information concerning installation costs:

The material cost per kilometer for cable is $200,000.

You are installing 100 kilometers of cable.

The cost per kilometer for installation depends on the sea conditions (sea state).

Sea State

Cost/kilometer

Total Installation Cost

Probability

I

$25,000

$25,000*100=$2,500,000

0.75

II

$100,000

$100,000*100=$1,000,000

0.25

Installation Cost

Total Material Cost:

a.What would be the estimated cost of the project if you knew with certainty that, during the time you were installing the cable, you would encounter sea state I 75% of the time and sea state II 25% of the time?

b.Run a Crystal Ball calculation of the total estimated cost of the project, assuming the probability of sea state 1 is normally distributed with a mean of 75% and a standard deviation of 5%.Only sea states I and II are possible.Post your result, including your cost forecast.

c.What is your mean expected cost?

d.What estimated cost provides you 90% assurance that your actual cost will be less than that amount?