Answer to Question #275771 in Economics of Enterprise for Fernando

Question

A project has a life of 10 years, and no salvage value. The firm uses an interest rate of 12% to evaluate

engineering projects. The project has an uncertain first cost and net revenue.

What is the joint probability distribution for first cost and net revenue?

Answer 1

The net present worth also known as the net present value calculated the difference between the present values of the cash inflows and the present values of the cash outflows. The net present worth is used for calculating the value of the investment by using a discount rate.