You are considering a project that will cost you $16,000,000 initially. Your cost of capital for this project is 8%. There is a 80% probability that the project will generate cash flows of $2,000,000 per year in perpetuity, and a 20% probability that the project will generate cash flows of $500,000 per year in perpetuity. If you could sell the project at the end of the first year for $[x], what is the value of this abandonment option today? Enter your answer in dollars and cents. For example, $123,456 would be 123,456.

What is a common way statistics can be deceptive? 

Which statement most represents the fallacy listed below: “Since crime has gone up dramatically, if we don’t buy this new security system right now, our house is definitely going to get broken into!”

Which fallacy most represents the fallacy listed below: There’s no point in enacting new legislation on gun control.  The bad guys are going to use guns no matter what.

Which fallacy most represents the statement below: Either we make the costly repairs to North Hall, or we just tear down the whole building.

Which of the following questions would help uncover value assumptions?

Instructions: You have 3 hours (8PM – 11PM) to complete the exam.  This is a closed book and closed notes exam. Only a physical scientific calculator is allowed. No graphing calculators, electronic devices, books, notes, or other reference materials are permitted during the exam. You may only use a pen or pencil and blank scratch paper. Write all answers clearly in the space provided and show all necessary work to receive full credit. If you need additional space or prefer to write your solutions on separate sheets, you may do so. In that case, clearly label each sheet with your name and the corresponding question number. After completing the questions, scan your solutions and upload them to Canvas as a SINGLE .pdf file. You may use your phone to scan your work. Then, either share the file with your computer or email it to yourself in order to upload it. Ensure that all pages are legible, properly ordered, and clearly labeled with your name. Now you can start. Exam 2 – make up.pdf

A stamping machine produces can tops whose diameters are normally distributed with a standard deviation of 0.01 inch. At what “normal” (mean) diameter should the machine be set so that no more than 5% of the can tops produced have diameters exceeding 3 inches? (10 points)

X 0 1 2 3 4 p(X) 0.07 0.15 0.45 0.25 0.08   Given the probability distribution of X, estimate the following: a. Mean (4 points) b. Variance (4 points) c. Standard deviation (2 points)

The Rockwell hardness of a metal is determined by impressing a hardened point into the surface of the metal and then measuring the depth of the penetration of the point. Suppose the Rockwell Hardness of a particular alloy is normally distributed with mean 70 and standard deviation 3. a. If a specimen is acceptable only if its hardness is between 67 and 75, what is the probability that a randomly chosen specimen has an acceptable hardness? (5 points) b. If the acceptable range of hardness is (70-c, 70+c), for what value of c would 95% of all specimens have acceptable hardness? (5 points)