MARR IS 12% 20 year project life. use part a for info for all parts

8.2 A team at the MTA must advise which of two subway car models should be purchased (only one must be selected). Since the projects contain novelty technology, the performance is uncertain and the revenue will be different under each scenario. Estimated probabilities for each type of performance associated with annual savings are given below. Assume a 12% MARR and 20-year project life Altemative Initial Investment $18,000,000 Performance Good Average Poor Good Average Poor Probability 0.25 0.4 0.35 0.3 0.5 0.2 Annual Savings $3,450,000 $2,800,000 $2,025,000 $3,000,000 $1,890,000 $1,350,000 2 $12,500,000 a) Draw the Decision Tree (12 points) b) What is the expected value of annual revenue for each altemative? [12 points) c) What is the expected annual worth for each alterative? [12 points] d) Which alterative do you recommend and why? [2 points)