Question
Atomic Blaster Bean Company is considering the purchase of one of bodacious bean burners Hickory Honey or Beantastic burner. Both should provide a benefit over
Atomic Blaster Bean Company is considering the purchase of one of bodacious bean burners "Hickory Honey" or "Beantastic burner." Both should provide a benefit over a 10-year period and each requires an investment of $450,000.
Looking at the following table which includes estimates of rates of return, probabilities for pessimistic, most likely and optimistic results.
Hickory Honey
Investment Amount Probability
$450,000 1.00
Rate of Return
Pessimistic: 10% .10
Likely: 14% .70
Optimistic 19% .20
Bean-tastic Burner
InvestmentAmount Probability
$450,000 1.00
Rate of Return
Pessimistic: 7% .30
Likely: 14% .40
Optimistic 21% .30
A) Range of rate of return
B) Expected Return?
C) Standard Deviation?
D) Best option?
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