1. You are estimating costs for installing undersea cable in the Persian Gulf (aka the Arabian Gulf). You have the following information concerning installation costs:

• The material cost per kilometer for cable is $200,000.
• You are installing 100 kilometers of cable.
• The cost per kilometer for installation depends on the sea conditions (sea state).

Sea State

Cost/kilometer

I

$25,000

II

$100,000

1. What would be the estimated cost of the project if you knew with certainty that, during the time you were installing the cable, you would encounter sea state I 75% of the time and sea state II 25% of the time?
2. Run a Crystal Ball calculation of the total estimated cost of the project, assuming the probability of sea state 1 is normally distributed with a mean of 75% and a standard deviation of 5%. Only sea states I and II are possible. Post your result, including your cost forecast.
3. What is your mean expected cost?
4. What estimated cost provides you 90% assurance that your actual cost will be less than that amount?