An Engineer Is Considering the Size of a Reservoir for Flood

An engineer is considering the size of a reservoir for flood control in the northern part of Germany. The size of the reservoir is closely related to the annual rainfall. In addition, there will be reparation costs from damages when the amount of rainfall exceeds the design capacity. If such damage occurs, it is estimated that the annual reparation cost will be 2.3% of the capital investment. The probabilities of specific amounts of rainfall per year and the estimated investment costs of the reservoir are given below. Using an interest rate of 8% per year and a study period of 11 years, determine the appropriate investment on the basis of AW.

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AW110 8%) = - $384,750.00 AW12...

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