Question

A bridge in town is getting old. If it fails it will cost $5 million dollars...

A bridge in town is getting old. If it fails it will cost $5 million dollars to repair and will lead to $2 million dollars in lost fees from the toll-bridge. They can pay $2 million to repair and update the bridge now. If they do so, there will only be a 1% chance it fails in the next 20 years. If they don't repair and update the bridge there is a 5% chance it will fail in then next 20 years. What is the ecxpected value for the two options?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You have four choices. A) To build a “stainless-steel” bridge that will cost you $5 million...
You have four choices. A) To build a “stainless-steel” bridge that will cost you $5 million and last 120 years; or, B) build a regular steel bridge that needs to be replaced after 60 years and today would cost you $4 million and then (in 2020-$) another $4 million in 60 years, or C) build a wooden bridge that costs $3 million and need to be replaced every 20 years (i.e., replaced 5 times to last 120 years) (every time...
1. Jack Straw is now 65 years old and has accumulated $850,000 for his retirement. He...
1. Jack Straw is now 65 years old and has accumulated $850,000 for his retirement. He wants this sum to pay a steady annual income for the next twenty years, starting one year from now. Assuming a discount rate of 3.45% p.a., what kind of annual income can he expect for the twenty year period?          2. You won a “$50,000” prize which will be paid in annual installments under one of two options as follows: (figures in thousands of dollars)...
13-2 a. Project X has an up-front cost of $20 million. The project is expected to...
13-2 a. Project X has an up-front cost of $20 million. The project is expected to produce after-tax cash flows of $7.5 million at the end of each of the next 3 years (t = 1, 2, and 3). The project has a WACC=10%. What is the project’s NPV? b. However, if the company waits a year they will find out more about the project’s expected cash flows. If they wait a year, there is a 50% chance the market...
1.Albury Company is adding a new assembly line at a cost of $8.5 million. The company...
1.Albury Company is adding a new assembly line at a cost of $8.5 million. The company expects the project to generate cash flows of $2 million, $3 million, $4 million, and $5 million over the next four years. Its cost of capital is 16 percent. What is the internal rate of return that Albury can earn on this project? (Round to the nearest percent.) HINT: Use a financial calculator or the Excel function: =IRR(values,[guess]) Select one: A. 18% B. 19%...
1. What is the present value of $500 5 years from today if the opportunity cost...
1. What is the present value of $500 5 years from today if the opportunity cost of capital is 10%? 2. What is the value of $22.5 growing at 5% forever (“in perpetuity”) if the opportunity cost of capital is 10%? 3. What is the present value of $500 million 5 years from today if the target return for an investor is 40%? 4. If the 30-year treasury bill is currently paying 3%, and a firm’s cash flows are perfectly...
2. Suppose you will receive $1,000 in 4 years. If your opportunity cost is 6% annually,...
2. Suppose you will receive $1,000 in 4 years. If your opportunity cost is 6% annually, what is the present value of this amount if interest is compounded every six months? (8 points) What is the effective annual rate? (8 points) 3. Suppose you have deposited $10,000 in your high-yield saving account today. The savings account pays an annual interest rate of 4%, compounded semi-annually. Two years from today you will withdraw R dollars. You will continue to make additional...
Scott E. Miller, CPA, CVA has given an example of an expert witness in his article...
Scott E. Miller, CPA, CVA has given an example of an expert witness in his article entitled “You Got the Litigation Engagement, So Now What,” in The Value Examiner. Read his example and then prepare a list of mistakes that the expert made in his expert witnessing engagement. Let’s assume there is a CPA, Calvin P. Anderson. Calvin has been a practicing CPA for 15 years. He has a successful CPA firm providing a full range of traditional accounting and...
1. Lottery payments A major lottery advertises that it pays the winner $10 million. However this...
1. Lottery payments A major lottery advertises that it pays the winner $10 million. However this prize money is paid at the rate of $500,000 each year (with the first payment being immediate) for a total of 20 payments. What is the present value of this prize at 10% interest compounded annually? Report your answer in $millions, rounded to two decimal places. So, for example, if you compute the answer to be 5.7124 million dollars then you should submit an...
Team 5 answer the questions What are 4 key things you learned about the topic from...
Team 5 answer the questions What are 4 key things you learned about the topic from reading their paper? How does the topic relate to you and your current or past job? Critique the paper in terms of the organization and quality. Incentive Systems             In this paper, we will focus primarily on financial rewards that companies use to attract, retain and motivate the brightest and most talented candidates in the labor market. By providing a reward system that...
You work as the lead HR Manager for BWA Enterprises, a company that builds parts for...
You work as the lead HR Manager for BWA Enterprises, a company that builds parts for one major car manufacturer. On the organization chart, management, and administrative tasks are represented by rectangles, the union is represented by the ovals. You are preparing for negotiations for the next CBA. The current, 3-year CBA is set to expire in 12 months. At present, there is a new union president that you have found very difficult to deal with; the union is considered...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT