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Copyright © 2025 Pearson Education, Inc.Solutions to Chapter 12 Problems
12-1 EUAC nothing = (0.01)($1,000,000) = $10,000
EUAC culvert =
05.007.0
20) 5%, 20)(F/P, 7%, P/F,(1000,2$
000,50$(A/P, 7%, 20) = $7,688
The EUAC of building the culvert is less than the EUAC of a mudslide (with no culvert). Building the culvert is economical.
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Copyright © 2025 Pearson Education, Inc.12-2 Expected Present Worth = 120,000(0.2) + 150,000(0.3) + 100,000(0.4) + 80,000(0.1) = 117,000
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Copyright © 2025 Pearson Education, Inc.12-3 Calculate the Present Worth for each scenario separately, and then calculate the Expected Present Worth using the probability provided.
Optimistic: -200,000 + (70,000 – 30,000)(P/A, 7%, 5 years) = -35,992
Most Likely: -200,000 + (60,000 – 35,000)(P/A, 7%, 5 years) = -97,495
Pessimistic: -200,000 + (60,000 – 35,000)(P/A, 7%, 5 years) = -158,998
Expected Present Worth = -35,992(0.3) + -97,495(0.5) + -158,998(0.2) = -91,345
Since negative, the company should not pursue this new product opportunity.
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