Production tooling

timer Asked: Apr 27th, 2013

Question description

GE is in process of purchasing a production tool. In their search, they have
gathered the following information about two possible tools.

                                     A                                       B

Investment                    12,000                           12,000

                                                                   A                                  B

                                                Return Probability                    Return  Probability

Pessimistic                                     15.00%  0.32                      9.00%  0.3

Most Likely                                     18.00%  0.45                       18.00%  0.45

Optimistic                                       21.00%  0.25                        25.00%  0.25


A) Compute expected
rate of return for each choice.

B) Compute variance
and standard deviation of rate of return for each machine.

C) Based on the
coefficient of variation, which copier should they purchase?

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