If IRR is greater than the hurdle rate, the management should ...

[jhjkgdfhk]

If IRR is greater than the hurdle rate, the management should reject the project.
 
  Indicate whether the statement is true or false

Question 2

At the West-Side Drive-Inn, customers arrive at the rate of 10 every 30 minutes. The time between arrivals is exponentially distributed.
 
  Based on this information, what is the probability that the time between two customers arriving will exceed 6 minutes?

[kescobar@64]

Answer to Question 1

FALSE

Answer to Question 2

To solve this problem, we are looking for P(x > 6). It will be helpful to use the complement approach. Therefore, we wish to find 1 - P(x  6 ). Since we are dealing with an exponential distribution with arrival rate equal to 10 per 30 minutes,  = 10 per 30 minutes = 0.33 per minute. Then we use P(x  a) = 1 - e-a. To do this we can use either the table of exponential values in the back of the text or software such as Excel. We are looking for:
1 - (1 - e-33(6 )) = 1 - (1 - e2 ) = 1 - (1 - 0.1353 ) = 0.1353
Thus, there is approximately a 0.1353 probability that the time between two customers arriving will exceed 6 minutes. Note that if Excel or other software is used, the answer might be slightly different due to rounding differences.