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A road between Castle Rock (Westerlands) and King's Landing (Stormlands), will have a most likely construction cost of $10 million per mile. Doubling this cost
A road between Castle Rock (Westerlands) and King's Landing (Stormlands), will have a most likely construction cost of $10 million per mile. Doubling this cost is considered to have a probability of 5% and cutting it by 30% is considered to have a probability of 19%. Westerlands and Stormlands are located in Westeros, where the interest rate to assess this type of projects is 4%, and the road should last 25 years before major reconstruction. Question. What are the expected value and standard deviation of the equivalent annual construction cost per mile, i.e., ELEUAC) and SD(EUAC)? Hint: [A/P,4%,25] = 0.064. E[EUAC] = $635520 and SD(EUAC) = $913912 O ELEUAC] = $759803 and SD(EUAC) = $276711 O E[EUAC] = $759803 and SD(EUAC) = $1109581 O E[EUAC] = $635520 and SD(EUAC) = $165723
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