Cooper Construction is considering purchasing new, technologically advanced equipment. The equipment will cost $640,000 with a salvage value of $75,000 at the end of its useful life of 10 years. The equipment is expected to generate additional annual cash inflows with the following probabilities for the next ten years:
a) What is the expected cash flow?
b) Cooper's cost of capital is 10%. What is the expected net present value?
c) Should Cooper buy the equipment?

Question

Cooper Construction is considering purchasing new, technologically advanced equipment. The equipment will cost $640,000 with a salvage value of $75,000 at the end of its useful life of 10 years. The equipment is expected to generate additional annual cash inflows with the following probabilities for the next ten years:  
a) What is the expected cash flow?
b) Cooper's cost of capital is 10%. What is the expected net present value?
c) Should Cooper buy the equipment?

Quizplus · Accepted Answer

The Answer of Cooper Construction is considering purchasing new, technologically advanced equipment. The equipment will cost $640,000 with a salvage value of $75,000 at the end of its useful life of 10 years. The equipment is expected to generate additional annual cash inflows with the following probabilities for the next ten years:  
a) What is the expected cash flow?
b) Cooper's cost of capital is 10%. What is the expected net present value?
c) Should Cooper buy the equipment?

Cooper Construction Is Considering Purchasing New, Technologically Advanced Equipment