Spring 2015 Exam 1 Solution

Here are the final numerical results for each section of the exam. You can use them to check your work if you do the exam for practice.  If you have trouble with the problems, or don't get the answers shown here, stop by during office hours or make and appointment and we can go over them. 

Question 1

(a) ENPV of T=$151,783

(b) ENPV of M=$353,678

(c) The agency should choose plan M

Question 2

(a) P=$480, Q=24,000

(b) Pd=$540, Ps=$360, Q=18,000

(c) T=$180

(d) Change in CS = -$1.26 M

(e) Change in PS = -$2.52 M

(f) Change in revenue = +$3.24 M

(g) Overall gain = $720k

Question 3

(a) T = $10

(b) Revenue in D: low elasticity = $80,000; high elasticity = $60,000

(c) Expected PV of revenue: $1.44 M

(d) The analyst is correct: the expected PV exceeds the $1M cost of the plant.

Question 4

(a) Qat = 80; MCA = $100

(b) Qa1 = 50; Qa2 = 20; Qa3 = 10

(c) TCA1 = $2500; TCA2 = $1000; TCA3 = $500; Total = $4000

(d) Pp = $100

(e) Allocations to 1, 2 and 3: 275, 190 and 55

(f) Gain = $6400