Question
The City of Winnipeg is considering whether or not to expand the replacement of its fleet of gasoline-powered automobiles with electric cars. Currently the city
The City of Winnipeg is considering whether or not to expand the replacement of its fleet of gasoline-powered automobiles with electric cars. Currently the city has replaced 20 vehicles with hybrid gasoline-battery technology but now they are considering moving to all electric vehicles. New data from the manufacturer of electric cars claims that the city will experience significant cost savings over the life of the fleet if it chooses to expand its electric fleet of vehicles. If the manufacturer is correct, the city will save an estimated $1.25 million dollars. If the electric cars have safety problems in the future, as some critics suggest, the expansion of electric cars will cost the city $535,500. A third possibility is that less serious technical problems will arise and the city will break even with the expansion. A consultant hired by the city estimates the probabilities of these 3 outcomes are 0.26, 0.41 and 0.33 respectively. The city has an opportunity to implement a pilot program that would indicate the potential cost or savings resulting from the expansion to electric cars. The pilot program involves renting a small number of electric cars for 3 months and running them under typical conditions. The pilot program would cost the city $34,750. The consultants believe that the results of the pilot program would be significant but not conclusive; they provide the city with the following compilation of probabilities based on their experience consulting with other cities under the same conditions. According to the consultants, the reliability for the pilot program in the past has been:
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