this is stats problem for engineering economics class

Moads/CEE-4200-Assg4.pdf Stats problems 1. (20 points) Refer again to the interest rate data from Assignment 1 (reproduced here): Lender 1 2 3 4 5 6 7 Interest, % 3.1 4.18 5.59 2.87 3.92 4.13 4.71 8 3.76 The mechanical engineers on your pump station design team are getting bids from 4 different pump suppliers for two pumps (one is a backup) for a daily average flow of 9 million gallons per day to fill a storage tank that is 300 ft above the clear well (small storage volume at the pump station) level. Before the bids are due, the cost engineer needed an estimate of the pump costs for a preliminary cost estimate and asked you to provide one. In order to not bias the procedure, you randomly call 10 different pump companies not on the list of the 4 bidders, and get 10 (very!) preliminary bids, which the pump suppliers claim could vary by 10% by the time formal bids were made. Bid Price, $ 2 6970 10 7550 10 3 6790 8 4 6750 12 5 6820 11 6 8230 9 7 7730 9 8 8490 10 9 6650 10 10 7600 10 Life, yrs Since the project is expected to start two years from now, there's some uncertainty about the interest rates and the cost engineer says that the MARR = interest rate + 5% so there will be uncertainty about the MARR too. You check with your local bank and are told that in two years the interest rate could be 5+1% (standard deviation). a. After you chew out the mechanical engineering team for being so slow getting bids, describe how you would approach the question of the cost estimate for the pumps in the pump station, accounting for uncertainty in the pump costs, design life, and interest rate. The bids (finally) come in and the ME team wants to do a formal comparison of two of them (the two lowest qualifying bids). Bid 1: $7500 with a 8 year life, Bid 2: $8500 with a 10 year life and each is projected to have the same annual operating and maintenance costs. Assume also that the bids are mutually exclusive (that is, you choose one only of the two) b. Compare the two bids using a present worth analysis c. Will the uncertainty in interest rates affect the outcome of this comparison? d. After you choose what you think is the best pump, estimate the probability that you might have made the wrong choice Moads/CEE-4200-Assg4.pdf Stats problems 1. (20 points) Refer again to the interest rate data from Assignment 1 (reproduced here): Lender 1 2 3 4 5 6 7 Interest, % 3.1 4.18 5.59 2.87 3.92 4.13 4.71 8 3.76 The mechanical engineers on your pump station design team are getting bids from 4 different pump suppliers for two pumps (one is a backup) for a daily average flow of 9 million gallons per day to fill a storage tank that is 300 ft above the clear well (small storage volume at the pump station) level. Before the bids are due, the cost engineer needed an estimate of the pump costs for a preliminary cost estimate and asked you to provide one. In order to not bias the procedure, you randomly call 10 different pump companies not on the list of the 4 bidders, and get 10 (very!) preliminary bids, which the pump suppliers claim could vary by 10% by the time formal bids were made. Bid Price, $ 2 6970 10 7550 10 3 6790 8 4 6750 12 5 6820 11 6 8230 9 7 7730 9 8 8490 10 9 6650 10 10 7600 10 Life, yrs Since the project is expected to start two years from now, there's some uncertainty about the interest rates and the cost engineer says that the MARR = interest rate + 5% so there will be uncertainty about the MARR too. You check with your local bank and are told that in two years the interest rate could be 5+1% (standard deviation). a. After you chew out the mechanical engineering team for being so slow getting bids, describe how you would approach the question of the cost estimate for the pumps in the pump station, accounting for uncertainty in the pump costs, design life, and interest rate. The bids (finally) come in and the ME team wants to do a formal comparison of two of them (the two lowest qualifying bids). Bid 1: $7500 with a 8 year life, Bid 2: $8500 with a 10 year life and each is projected to have the same annual operating and maintenance costs. Assume also that the bids are mutually exclusive (that is, you choose one only of the two) b. Compare the two bids using a present worth analysis c. Will the uncertainty in interest rates affect the outcome of this comparison? d. After you choose what you think is the best pump, estimate the probability that you might have made the wrong choice