It is now felt that final scrap value of machine depends on 2 factors, whether or not a new supplier enters the market
(which would reduce the likely scrap value) and the strength of the dollar against other currencies( since sales
of used machines will be made abroad and invoiced in foreign currency) . Adverse effects each will reduce the scrap value by 10% of the fig used in investment appraisal. Relevant probabilities are as follows
New supplier Probability Strong $ Probability
Yes 0.4 yes 0.3
No 0.6 no 0.7
What is now expected value of scrap proceeds from machine 2?
a)$106800
b)$109000
C)$111600
d)$113000
Correct ans is C Sir please can you explain
Ask the Tutor ACCA FM
Kit mcq
8y ago#1It is impossible for me to explain, because you have not typed out all of the information. You have not said what the scrap proceeds are!!
Sir scrap value of machine 2 is 120000
8y ago#3Best is to prepare a decision tree in the same way as you would for Paper F5.
You know the probabilities of each of the possible outcomes, and you can calculate what the various outcomes are. Then calculate the expected value.
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