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Donatello Inc., now needs to evaluate an electric vehicle project. Since the project uses new technology, the performance of the project is uncertain and the
Donatello Inc., now needs to evaluate an electric vehicle project. Since the project uses new technology, the performance of the project is uncertain and the annual revenue and salvage value will be different under each scenario. Estimated probabilities for revenues and salvage values are given below. Assume a 10% MARR and 5-year project life. [15 points) EOYO EOY 1-5 5 5 Initial Invest. Scenario Prob. Annual Revenue Scenario Prob. 1 45% $ 75,000 $ Salvage Value $ 82,500 $ 78,750 $ 80,000 $ 64,800 $ 61,800 1.1 1.2 1.3 2.1 2.2 40,000 30% 20% 50% 45% 55% 2 55% $ 60,000 a) Calculate the expected values of the salvage value at EOY 5 for Scenario 1 and Scenario 2 separately. [6 points] b) Calculate the expected value of the FW for the entire possible investment. Show all work to receive full credits. Do not use PW or AW for your calculations. [9 points]
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