CumChan Has Been in the Chemical Industry for the Past

question 3

Essay

CumChan has been in the chemical industry for the past 22 years.Current employment total is 65 workers,and the current economic situation (inflation of 4 percent,nominal discount rate)has forced the company to close its doors.CumChan however,must continue to pay health care costs for the next four years at a cost of $2,400 per worker,at an increasing rate of 3 percent above inflation.A consultant is called in to find the present value of this obligation.

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Definitions:

M/M/S

A queuing model notation representing a system with exponential service times, exponential interarrival times, and S servers.

Average Number

Represents the mean or central value of a set of numbers, calculated by dividing the sum of all the values by the number of values.

Poisson Distribution

A probability distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space.

Negative Exponential Distribution

A probability distribution used to model time between events in a Poisson process, indicating a constant rate of occurrence.