Exhibit 11-1
a Company Is Considering Investing $1

question 23

Essay

Exhibit 11-1
A company is considering investing $1.2M in a facility to manufacture a new product. The product will have a five year life, after which the facility will be shut down. A pro forma cash flow sheet for this project, with forecasted production levels, unit prices, and production costs, is shown below:

-[Part 2] Refer to Exhibit 11-1.Suppose that the forecasted price levels shown in the pro forma cash flow sheet are not deterministic,but rather are expected to fluctuate due to market forces.The prices are expected to be normally distributed in each year,with the following means and standard deviations:
Using the appropriate @RISK functions in the pro forma,what is the expected NPV
Would you recommend investing in this project
Explain. $$\begin{array} { c c c c c c } \text { Year } & 1 & 2 & 3 & 4 & 5 \\\text { Mean } & \$ 27.40 & \$ 26.60 & \$ 25.50 & \$ 24.80 & \$ 23.50 \\\text { Std. Dev. } & \$ 5.50 & \$ 5.30 & \$ 5.00 & \$ 4.50 & \$ 4.10\end{array}$$

Identify the circumstances under which researchers reject the hypothesis based on confidence intervals.

Recognize the definitions and purpose of a scientific hypothesis.

Distinguish between independent t-tests and their application criteria.

Grasp the interpretation of scatter plots in determining correlation strength and direction.

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Definitions:

Quality Loss Function

highlights the losses incurred by deviating from the optimal product quality level, emphasizing that loss increases as the product moves away from what is considered the target value.

Cause-and-Effect Diagram

A visual tool for identifying and organizing the potential causes of a problem in order to identify its root causes, also known as a fishbone or Ishikawa diagram.

Service Quality

The degree to which a service meets the customer's expectations, often evaluated based on factors like responsiveness, reliability, and professionalism.

Cause and Effect Diagram

Also known as a fishbone diagram, it is a tool used to systematically list and analyze the potential causes of a specific problem or effect.