Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 5

A company that manufactures amplified pressure transducers is trying to decide between a dual- speed and a variable-speed machine. The engineers are not sure about the salvage value of the variable-speed machine, so they have asked several different used-equipment dealers for estimates. The results can be summarized as follows: there is a 32% chance of getting $20,000, a 45% chance of getting $28,000, and a 13% chance of getting $34,000. Also, there is a 10% chance that the company may have to pay $5000 to dispose of the equipment. Calculate the expected salvage value.