Probability Question - CII Quantitative Techniques

Question

Probabilty Question:

 

Stereo industries has to decide on the production of a new turntable expected to have a market life of 10 years by either budding a large plant costing Rs.28,00,000 or a small plant costing Rs.14,00,000. Estimate of sales over the 10 year period is expected to be as below: High demand with probability 0.5; Moderate demand with probabaility 0.3 and Low demand with probability 0.2. Outcomes for the combination of plant size and demand are:

                   High            Moderate            Low
Large          10,00,000     6,00,000              -20,000
Small          2,50,000      4,50,000               5,50,000

Advice the industries whether to go in for a large or small plant

Answer 1

a man borrowed a sum of money at 6% simple intrest per annum and after 3 months he borrowed rs 200 at 4%. six months after that it was found that the total intrest on two loans amounted to rs 17.50. How much did he borrow at first ?

Answer 2

~~For the large plant

Prob(High Dem.) = 0.5 and Outcome = 10,00,000
Prob (Med Dem.) = 0.3 and Outcome = 6,00,000
Prob (Low Dem.) = 0.2 and Outcome = -20,000

So
Profit/Loss = Total Invt(28,00,000) – { (0.5 * 10,00,000) + (0.3 * 6,00,000) + (0.2 * - 20,000)} =  28,00,000 – {6,76,000} = 21,24,000

For the small plant

Prob(High Dem.) = 0.5 and Outcome =  2,50,000
Prob (Med Dem.) = 0.3 and Outcome =  4,50,000
Prob (Low Dem.) = 0.2 and Outcome =  5,50,000

So
Profit/Loss = Total Invt(14,00,000) – { (0.5 * 2,50,000) + (0.3 * 4,50,000) + (0.2 * 5,50,000)} =  14,00,000 – {3,70,000} = 10,30,000