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8. Acme Equipment Company is considering the development of a new machine that would be marketed to tire manufacturers. Research and development costs for the
8. Acme Equipment Company is considering the development of a new machine that would be marketed to tire manufacturers. Research and development costs for the project are expected to be about $4 million but could vary between $3 and S6 mil lion. The market life for the product is estimated to be 3 to 8 years with all interven- ing possibilities being equally likely. The company thinks it will sell 250 units per year but acknowledges that this figure could be as low as 50 or as high as 350. The company will sell the machine for about $23,000. Finally, the cost of manufacturing the machine is expected to be $14,000 but could be as low as $12,000 or as high as $18,000. The company's cost of capital is 15%
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