Engineering Economics
You own a fruit garden. Choose one of the followings by showing clear calculation. Yearly inflation
rate is 5%.
– Option A: Invest 3 lac BDT to buy cultivation tools/factory. At end of every year you may
gain high (8 lac BDT), medium (3 lac BDT) or low (1 lac BDT) with respective probability 0.3,
0.4 and 0.3 for the next 5 years.
– Option B: Lease the garden. The lessee pays 3.5 lac BDT at the beginning of each year for
the next 5 years. There is risk of plant mortality due to hyper production. Loss may be high:
9 lac BDT (probability 0.1) or low: 1 lac BDT. This loss is realized at the end of 5th year only.
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