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 10 years:

Probability Cash flow

.10 $60,000

.20 $85,000

.45 $110,000

.25 $130,000

1) What is the expected cash flow?

2) Coopers cost of capital is 10%. What is the expected net present value?

c) Should Cooper buy the equipment?

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